· US base oils buying interest could stay cautious even after a rise in refiners’ posted prices, and then higher US export prices in H2 March 2024.· A widening posted price premium to domestic spot prices, and a narrowing export price discount to domestic prices, often precede a change in domestic prices.· US export prices remain unusually low relative to domestic prices even after their recent rise.· US Group II light-grade posted price premium to feedstock prices stays low even after recent price-increase.· Price differentials suggest that rise in prices reflected more the impact of higher feedstock costs rather than of tighter supply.· Signs of sufficient supply lower prospect of steep rebound in prices, curbing buyers’ need to bring forward their procurement plans.· Higher US export prices narrow their discount to prices in key outlets like India, making arbitrage less attractive.· Higher US export prices cut their discount to FOB Asia Group II prices, boosting interest in supplies from other markets..· Latin America’s base oils demand faces structural slowdown compared with 2023 amid rule-changes and completion of plant maintenance work.· Region’s demand for overseas supplies could start to stabilize or improve in markets like Brazil and Mexico, whose imports of US base oils fell sharply at end-2023 and early this year.· Prospect of pick-up in Latin America’s lube demand in Q2 2024 from Q1 2024 would add to pick-up in base oils demand..· Brazil’s February lube demand rises for second month, with strong increase in engine oils and industrial oils consumption..· Brazil’s higher domestic Group I base oils output and supply surplus in early 2024 likely to curb demand for overseas supplies compared with H2 2023.· Even so, rising lube consumption likely to support steady demand for overseas supplies of Group II base oils.· Argentina’s lube consumption shows signs of extending steep slide in Feb 2024, highlighting mixed demand dynamics throughout Latin America..· Europe’s base oils demand likely to get support from seasonal pick-up in lube consumption.· Blenders’ strategy of maintaining lower stocks could speed up impact of any seasonal rise in lube demand.· Increasingly competitive base oil export prices give sellers more options, could spur regional blenders to speed up procurement plans to lock in supplies at current price levels.· Any sign of tighter-than-expected supplies could add to blenders’ moves to replenish inventories.· Lube demand shows signs of holding firm in southern Europe in Q1 2024, extending recovery from mid-2023 and contrasting with weaker consumption in northern Europe.· Germany’s December lube demand rises for first time year-on-year in fifteen months.. · Germany’s prolonged fall in lube demand until Dec 2023 had been key factor sustaining drop in Europe’s total lube consumption throughout last year.· Any extension of Germany’s rise in demand in 2024 would add to prolonged recovery in southern Europe and speed up reversion of Europe’s lube consumption to growth. · Rise in Germany’s demand contrasts with fall in domestic lube production for nineteenth month.· Contrasting trends raise prospect of cutting blenders’ inventories.· Domestic blenders likely to continue to maintain low inventories until they are confident that recovery in lube demand is set to continue.· Impact of any more sustained recovery likely to be more visible from end of first quarter of the year, when market faces seasonal pick-up in consumption.· Rise in Germany’s lube demand helps to sustain rise in Europe’s total lube consumption in Dec 2023 for third month..· Rise in Europe’s December lube demand contrasts with fall in region’s base oils output..· Trend contrasts with fall in demand and supply in Q3 2023 and fall in demand and rise in supply through most of 1H 2023.· Any extension of that dynamic of rising demand and falling supply raises prospect of a shrinking supply surplus, a growing need for imports and a drop in export volumes..Asia base oils demand outlook: Week of April 1.Global base oils margins outlook - week of April 1.Global base oils arb outlook: Week of April 1.Base Oil News stories and analysis also available on ICIS platform
