Americas/EMEA base oils demand outlook: Week of 23 June

·         US base oils demand could get support from higher crude oil prices that curb prospect of fall in base oils prices.

·         Even so, expectations of ready availability of supplies, combined with seasonal slowdown in lube consumption in coming weeks, likely to incentivize buyers to maintain low stocks.

·         Buyers face ongoing challenge of balancing expectations of weak fundamentals with repercussions of higher crude oil prices and risk of weather-related supply disruptions during Atlantic hurricane season.

·         Overseas demand for US supplies could ease following rise in outright Group II export prices and concern about pick-up in price-volatility.

·         Higher export prices cuts CFR India price-premium to US Group II N600 prices to narrowest level since end-Feb 2025.

·         Even with higher US export prices, CFR India price-premium remains wider than usual for time of year, contrasts with US prices flipping to premium to CFR India prices in Q2 2024.

·         Still-wide CFR India premium suggests any US supply-tightness is temporary, with limited price adjustments required to trigger a resumption of arbitrage flows.

·         Wide CFR India price-premium so far this year points to and helps to remove persistent surplus volumes of mid- and heavy-grade supplies from US market.

·         Wide CFR India price-premium coincides with India's sustained imports of mid- and heavy-grade base oils shipments from US so far this year.

·         Signs of persistent surplus volumes of US heavy grades increases importance of sustaining that buying interest in markets like India.

·         Discount of US Group II N600 export price to US N600 domestic price shrinks to narrowest level in more than nine months.

·         Dynamic could point to price-support at that level, raising prospect of firmer domestic prices or downward pressure on export prices.

·         Latin America’s base oils demand could be more muted in face of shrinking lube consumption and growing surplus supplies.

·         Region's lube demand typically rises at start of third quarter of the year before trending lower over following months.

·         Fall in consumption from year-earlier levels could magnify that slowdown.

·         Weaker lube demand would follow drop in region’s lube consumption for third straight month in April 2025.

·         Demand falls as Mexico’s lube consumption slumps by more than 20%.

·         Mexico’s weaker lube consumption coincides with fall in country’s automobile production for second straight month in May 2025.

·         Dynamic adds to signs of weaker economic activity in Mexico following imposition of US tariffs on sectors such as automobile industry.

·         Even if more muted, Latin America’s base oils demand likely to rely on supplies from US for now amid less feasible arbitrage from other regions like Asia and Europe.

·         South Korea’s base oils exports to Latin America stay lower than usual in May 2025 and Jan-May 2025.

·         Lower exports reflect tighter supply in Asia so far this year.

·         Expectations of rising surplus supply in Asia over coming months could trigger pick-up in exports to markets like Latin America.

·         Size of any such surplus supply could now be more manageable after recent slump in base oils margins boosts incentive for Asia refiners to cut run-rates.

·         Any such scenario could curb volume of arbitrage flows from Asia, leaving buyers in Latin America almost fully reliant on supplies from the US.

·         Europe’s base oils demand could turn more cautious, cushioning impact of recent jump in crude oil prices.

·         Any moves by suppliers to target higher prices in response to higher feedstock costs could add to buyers’ reluctance to procure additional supplies.

·         Prospect of rise in base oils availability in coming weeks increases importance for suppliers to sustain rather than curb regional buying interest.

·         Europe’s lube demand faces typical rise in month of July before sharp seasonal slowdown in month of August.

·         Dynamic likely to trigger fall in Europe’s lube demand in third quarter from previous three months.

·         Blenders are likely focusing more on slowdown in activity in month of August after already securing requirements for next month.

·         Seasonal slowdown in demand, combined with ongoing fall in Europe’s consumption from year-earlier levels, curbs blenders’ urgency to lock in additional volumes to cover for any unexpected supply disruptions.

·         France’s lube demand falls in April 2025 for third time in four months, highlighting ongoing slowdown throughout most of Europe.

·         Premium of Europe Group II heavy-grade price over Group I heavy neutrals continues to widen.

·         Widening premium could support firmer demand for Group I heavy neutrals once availability begins to improve.

·         Availability of Group I heavy neutrals likely to improve following completion of regional plant-maintenance work and as demand faces seasonal slowdown in coming weeks.