Americas/EMEA base oils demand outlook: Week of March 18

·        US base oils demand typically rises around this time of the year to meet seasonal pick-up in lube consumption.

·        Expectations of plentiful supply give buyers the flexibility to procure smaller volumes on a more regular basis, keeping stocks low.

·        Signs of more posted-price adjustments could prompt buyers to bring forward procurement plans.

·        Any such moves could tighten supply.

·        Any sign of tighter supply could incentivize buyers to procure larger volumes.

·        Still-wide gap between US domestic and export prices points to ongoing supply surplus.

·        US export prices stay unusually competitive, also pointing to ongoing surplus supply.

·        Competitive prices sustain firm overseas demand and interest in working arbitrage shipments to multiple destinations.

·        Latin America’s base oils demand could be more mixed.

·        Mexico’s January lube demand falls for ninth month on slumping consumption of automobile lubricants.

·        Mexico’s demand for base oils imports still likely to rise after surplus of US base oils exports to Mexico’s lube consumption almost disappears in Jan 2024.

·        Trend suggests US exports to Mexico are unlikely to fall any further and would leave the country with a shortage of base oils feedstock supplies if they did.

·        Brazil’s base oils demand could remain more muted as the country first works down a surge in surplus supplies from late last year and early this year.

·        Europe’s demand for Group II base oils from US likely to hold firm after US exports to the region extend fall in Jan 2024.

·        Slowdown in US exports to Europe coincides with Group II plant maintenance in Netherlands in Q1 2024.

·        Europe’s steep Group II price premium to US export prices keeps arbitrage open, points to ongoing buying interest for additional supplies.

·        Asia’s rising Group II prices and logistical complications add to Europe’s focus on Group II supplies from US.

·        Two-tiered recovery in Europe’s lube demand extends into start of 2024.

·        Lube demand in Spain and Portugal extends rise in Jan 2024, mirroring firm recovery in Italy.

 ·        Sustained recovery contrasts with more muted lube demand in northern Europe.

·        Rising demand in key Mediterranean markets incentivizes blenders to adjust their strategy of holding lower feedstock inventories.

·        Prospect of falling supply of Group I base oils in Europe could add to blenders’ incentive to hold larger volumes of those supplies to ensure sufficient availability.

·        Shipments of Russian origin account for almost half of Turkey’s Group I imports in Jan 2024.

·        Share of supplies from Russia is largest in fourteen months.

·        Rising share of supplies from Russia coincides with widening price discount of Russian supplies vs supplies from Europe.

·        Turkey’s share and volume of Group I supplies from Russia could rise further over coming months if prices in Europe rise and supply falls.

·        Trend increases importance of Turkey as key outlet for base oils from Russia.

·        Uganda’s base oils and lube imports fall in January for the second time in three months from year-earlier levels after imports rise strongly in 2023.

·        Rising imports through most of 2023 coincide with strong economic growth, which is expected to continue this year.