Americas/EMEA base oils demand outlook: Week of 19 May

·         US base oils demand likely to stay muted as concern about end-user consumption and signs of sufficient supply incentivize buyers to maintain low stocks.

·         Expectations of steady or lower base oils prices add to attraction of holding back.

·         US refiner’s posted-price cut last week was first such adjustment in more than six months.

·         Price-cut contrasts with US refiners’ more typical moves to raise posted prices in second quarter of the year in response to firmer supply-demand fundamentals.

·         Heavy round of plant maintenance work tightens US supply fundamentals from end-Q1 2025.

·         Lack of posted-price increases suggest concern about demand fundamentals outweighs tighter supply fundamentals.

·         US blenders face dilemma over coming weeks of extent of any stock-building as buffer against weather-related supply disruptions during Atlantic hurricane season.

·         Muted domestic demand would increase importance of overseas demand holding firm to absorb more US supplies.

·         US Group II heavy-grade export price maintains steep discount to CFR India price, sustaining feasibility of that arbitrage.

·         US light and heavy-grade base oils prices maintain steep discount to domestic Europe prices.

·         Steep discount boosts attraction of moving more volumes to that market.

·         Preference to move surplus supplies to other outlets rather than to Europe could limit any pick-up in shipments to that market.

·         Latin America’s demand for additional base oils supplies from overseas markets could stay more muted as signs of weak lube consumption boost the attraction of holding low stocks.

·         Blenders face challenge of balancing concerns about demand with risk of supply disruptions during Atlantic hurricane season.

·         Latin America’s lube demand falls in March 2025 for second month from year-earlier levels amid dip in consumption in region’s largest markets.

·         Weaker demand contrasts with rise in base oils supplies amid surge in US exports to the region.

·         Supply duly outpaces demand in March 2025 for first time in five months and by largest volume since end-2023.

·         Blenders’ low stocks enable them to absorb the surge in supplies.

·         Preference to maintain low stocks could delay requirements for another large wave of base oils supplies.

·         That preference could have more muted impact in early-Q2 2025, when plant maintenance work trims US' surplus supply.

·         That preference could have larger impact later in Q2 2025 as US supply recovers following completion of plant maintenance work.

·         Any demand for additional volumes from US to boost stocks ahead of Atlantic hurricane season would follow similar rise in US exports to South America in Q2 2024 from year-earlier levels.

·         Mexico’s lube demand likely to face growing pressure even after dip in lube consumption almost pauses in March 2025.

·         Pick-up in Mexico’s auto lube consumption cushions impact of ongoing slide in industrial oils consumption in March 2025.

·         Steadier lube demand coincides with rising automobile production in Mexico in Q1 2025.

·         Mexico’s automobile production then falls in April 2025 for first time in thirteen months, coinciding with imposition of US tariffs on automobile imports.

·         Dynamic suggests Mexico's auto lube consumption could face similar downward pressure in Q2 2025.

·         Europe’s base oils demand likely to stay cautious as mixed signals about lube consumption incentivize blenders to maintain low stocks.

·         Low stocks could trigger and magnify short-term pick-up in demand in response to firmer consumption or tighter supply.

·         Demand could duly get some support from tighter supply during round of plant maintenance both in Europe and in markets that supply Europe.

·         Spain’s lube demand rises in March 2025 for third time in four months.

·         Spain’s strong lube demand growth since end-2024 contrasts with recovery in consumption in Italy only from March 2025.

·         Signs of more widespread recovery in Europe’s lube consumption in March 2025 could face pressure in Q2 2025 because of uncertainty about tariffs and their impact on economic activity.

·         Demand for premium-grade base oils could get boost from signs of more-readily-available supply compared with Group I base oils.

·         US base oils exports to Europe hold steady in Q1 2025  even with round of plant maintenance in that country.

·         Europe’s Group I base oils supply could fall in Q1 2025 because of plant maintenance in markets like Italy.

·         Contrasting trends reflect availability of alternative supplies in US that help to cover for maintenance work, and lack of availability of alternative supplies in Europe, magnifying impact of maintenance work.