Americas/EMEA base oils demand outlook: Week of 16 Sept

·        US base oils demand could ease as lower crude/diesel prices and sufficient supplies incentivize buyers to hold back in anticipation of more price adjustments.

·        Buyers could cover seasonal pick-up in demand at end-Q3 with inventories built up earlier, curbing requirements for additional supplies.

·        Strength of any seasonal pick-up in demand could anyway be more muted amid sustained slowdown in domestic lube consumption.

·        Still-high export prices relative to overseas markets could curb demand in outlets like India.

·        Signs of recent pick-up in shipments to markets like India point to prices at levels that were able to attract sufficient demand.

·        Demand for Group III base oils likely to get support from competitive prices vs Group II base oils.

·        Prospect of plentiful Group III supply could give buyers the option of procuring smaller volumes more frequently, curbing any sharp rise in demand. 

·        Latin America’s base oils demand likely to ease as lower prices and improving availability boost attraction of holding off.

·        Prospect of seasonal slowdown in demand in Q4 2024 gives buyers additional leverage to hold back.

·        US Group II export price-premium to FOB NE Asia prices starts to narrow slightly in Sept 2024.

·        Any extension of the trend could prompt buyers in Latin America to target more supplies from US instead of Asia.

·        Any such move could cushion a slowdown in outright demand.

·        Chile’s base oils imports fall in Aug 2024 for second month from year earlier; 3-month rolling average imports rise 2% yoy.

·        Contrasting trends mirror Chile’s economy, which contracted in Q2 2024 before showing signs of improving in Q3 2024.

·        Any further improvement in economic activity could support pick-up in base oils requirements.

·        Europe’s Group II base oils demand could improve amid expectations of steadier supply compared with H1 2024.

·        Still-competitive Group II prices relative to Group I base oils could provide further support, and simultaneously erode demand for Group I base oils.

·        Any pick-up in Group II base oils demand is likely to be muted, even with seasonal pick-up in requirements at end-Q3, amid sustained drop in lube consumption among region’s largest markets.

·        Germany’s lube demand falls for sixth month in June 2024 from year earlier amid slumping engine oils consumption.

·        Germany’s rising lube production and exports in H1 2024 could compound slowdown in base oils requirements in other markets in Europe by eroding market share of domestic blenders in those markets.

·        Challenge of weak domestic lube demand and rising lube supplies from Germany add to incentive for blenders in other markets to maintain lower lube and feedstock inventories.

·        Germany’s falling lube demand compounds drop in Europe’s lube consumption, which falls in June 2024 for sixth time in seven months.

·        Europe’s lube consumption of more than 1.15 million tonnes in H1 2024 falls by 9%, or more than 110,000 tonnes from year-earlier levels.

·        Drop in Europe’s lube demand cushions but still lags the more-than 250,000-tonne fall in Europe’s base oils output in H1 2024, mostly because of plant maintenance work on several premium-grade base oils units.

·        Any further drop in demand in H2 2024 could match or exceed any drop in output because of more limited maintenance work in coming months.