Americas/EMEA base oils demand outlook: Week of 20 Jan

·         US base oils demand could be more muted over coming weeks following completion of any moves to replenish stocks at start of the year.

·         Seasonal dip in lube consumption during winter months and signs of healthy availability of supply add to attraction of maintaining lower stocks for now.

·         Demand could get support from rising crude oil prices, curbing expectations of lower base oils prices.

·         More limited downward price pressure incentivizes blenders to maintain rather than hold off their scheduled procurement plans.

·         Overseas demand for US supplies could get support from more limited surplus supply in other markets like Europe and Asia.

·         More feasible arbitrage to outlets like India and Middle East could sustain buying interest in those markets.

·         Demand could get further support from expectations of firmer base oils prices on the back of rising feedstock prices and prospect of firmer supply-demand fundamentals in coming months.

·         Dynamic would boost attraction of securing additional supplies at current price levels.

·         Latin America’s base oils demand could hold firm early this year amid signs of balanced-to-tight supply-demand fundamentals in late-2024.

·         Support for additional base oils from the US could be limited.

·         Latin America’s lube demand falls in Nov 2024 from Oct 2024 at slower pace than drop in region’s base oils supply.

·         Dynamic leaves supply-demand fundamentals relatively balanced at year-end.

·         Lack of any large supply overhang likely to prompt blenders to seek replenishment supplies early this year in preparation for rise in demand later in Q1.

·         Firm regional base oils output would curb blenders’ requirements for additional volumes from overseas markets.

·         More muted lube consumption growth and currency volatility adds to attraction of procuring smaller volumes from more local sources.

·         Chile’s base oils demand shows signs of slowing at end-2024, with imports dipping in Dec 2024 from year earlier for first time in four months.

·         Imports in three months to Dec 2024 continue to trend higher, lifting total shipments in 2024 by 6% from previous year.

·         Mexico’s lube demand resumes fall in Nov 2024, adding to signs of weaker consumption growth in Latin America.

·         Weaker consumption curbs prospect of pick-up in requirements for additional supplies from US market.

·         Any pick-up in base oils shipments from other markets to Latin America would compound any slowdown in demand for supplies from US.

·         Shipments from other markets duly materialize, with South Korea’s base oils exports to Brazil surging to multi-year high in Dec 2024.

·         Shipments surge even with less feasible arbitrage from Asia to Americas.

·         Europe’s base oils demand likely to stay muted as weak lube consumption incentivizes blenders to maintain low inventories.

·         Ready availability of most base oils grades gives blenders flexibility to procure supplies as and when required, adding to attraction of maintaining lower stocks.

·         Any change in demand for Group I base oils more likely to reflect rise in requirements for premium grades in lubricant formulations rather than concern about sufficient availability of Group I supply.

·         Group I base oils remain readily available even with shrinking regional production capacity in recent years, allaying concerns about security of supply.

·         Premium of Europe Group III 4cSt (low) price over Group II N150 shrinks to lowest since mid-2021.

·         Narrowing price premium could complicate any moves to adjust Group II prices higher.

·         Even with narrower price premium, any pick-up in demand for Group III base oils remains insufficient to absorb persistent surplus supply.

·         Turkey’s demand for Group I base oils from Russia likely to hold firm, with shipments freeing up domestic supplies from Turkey to move to other markets like Europe and north Africa.

·         Premium of domestic Europe Group I SN 150 over Turkey’s imported cargo price for supplies from Russia edges down in Nov 2024 to its lowest level in five months.

·         Premium is still up more than threefold from year-earlier levels.

·         Turkey’s Group I base oils imports from Europe still rebound to seven-month high in Nov 2024, exceeding volumes from Russia for first time since April 2024.

·         Rise in Turkey's imports from Europe removes more surplus supplies from that market, where lube demand faced seasonal slowdown at year-end.

·         Removal of surplus Group I shipments trims size of build-up of surplus supplies in Europe at end-2024.