Americas/EMEA base oils - week of Oct 23: Demand outlook

·        US base oils demand set to slow over coming weeks as blenders prepare for seasonal dip in lube consumption at year-end.

·        US gasoline demand falls in mid-October for third week.

·        US base oil posted prices face little pressure for any further upward adjustments for now, curbing incentive for blenders to procure additional supplies.

·        US Group II posted prices hold firm vs heating oil/VGO, supporting steady prices.

·        US Group II posted price premium to domestic spot prices stays wider than usual, curbing further prospect of any rise in prices.

·        Latin America’s base oils demand likely to be mixed.

·        Mexico’s finished lube demand falls in August for fourth month on slide in automobile lube consumption.

·        Lower demand coincides with slower consumption in other markets like Argentina and Chile.

·        Weaker demand set to face additional pressure from seasonal slowdown in consumption in fourth quarter.

·        Latin America’s lube demand still rises in August on back of unusually strong consumption in Brazil.

·        Trend increases importance of extended strength in Brazil’s market to limit seasonal dip in regional consumption over coming months.

·        Weaker demand in growing number of other markets in Latin America could complicate region’s ability to absorb surplus supplies from other regions.

·        US’ August base oils exports to Mexico stay unusually high, far outpace country’s slowing lube consumption.

·        Large share of surplus volumes likely used as fuel-extender.

·        Trend provides US refiners with valuable outlet for surplus light-grade base oils.

·        Trend more feasible when US export base oil prices are similar to or at a discount to heating oil prices.

·        Rebounding heating oil prices in recent weeks likely to sustain attraction of procurement of base oils for Mexico's fuel-extender market.

·        Brazil’s outright base oils demand likely to get support from firm lube consumption.

·        Brazil’s demand for base oils from overseas sources likely to be more muted after build-up of stocks ahead of/during plant maintenance work.

·        Europe’s base oils demand likely to stay muted amid expectations of sufficient supply, seasonal slowdown in lube consumption.

·        Europe’s Group III base oils imports from Mideast Gulf rebound in August, extending steady rise in shipments from the region.

·        Imports rise even in face of increasingly weak Europe Group III base oils values.

·        Rise in imports compounds pressure on prices.

·        Rise in imports suggests refiners’ margins remain attractive enough and that they also face weak demand in other markets.

·        Europe’s August base oils exports to Nigeria recover after pause in July, stay lower than usual.

·        Low volumes compound fall in global base oils exports to Nigeria in August to ten-month low.

·        Seasonal slowdown in lube demand in Nigeria in Q3 2023 cushions impact of drop in supplies.

·        Slump in shipments still increases need for Nigerian buyers to replenish depleted stocks after rainy season.

·        Trend incentivizes Nigerian buyers to diversify their sources of base oils supplies beyond Europe and US.

·        Nigerian buyers line up growing volume of shipments from other markets instead, including Saudi Arabia.

·        Buyers likely to remain interested in any surplus supplies from Europe at year-end.

·        But diversification of supply sources would put more pressure on any European supplies to be at competitive prices versus alternative shipments.

·        Revival in global base oils imports from Qatar in August include strong rebound in supplies to Asia and Europe and dip in shipments to US.

·        Qatar’s shipments to Europe exceed shipments to US in August for second time in three months. Shipments to US typically far exceed flows to Europe.

·        Any extension of slowdown in flows to US and any further recovery in shipments from Qatar would leave other regions absorbing even larger share of the supplies.