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

·        US base oils demand could ease as buyers start to focus on impact of seasonal slowdown on already-weak lube consumption in Q4 2024.

·        Concern about weak end-user demand likely to boost importance of using up and trimming surplus supplies.

·        Focus on stock-management likely to curb further buyers’ interest in seeking additional supplies.

·        Weakening fundamentals and still-high base oils prices relative to other markets support expectations of further downward price pressure.

·        Expectations of lower prices add to incentive for buyers to curb their procurement plans for now.

·        Arbitrage to overseas markets like India stays hard to work even after recent drop in prices.

·        Signs of regular shipments to India throughout Q3 2024 suggest prices for some cargoes were at levels that attracted sufficient buying interest in that market.

·        Latin America’s base oils demand similarly likely to ebb as seasonal slowdown in consumption and expectations of lower prices curb buying interest.

·        Region’s demand for US supplies could get boost if arbitrage from Asia were to close.

·        Arbitrage from Asia to Americas starts to turn more marginal in Sept 2024.

·        Latin America’s lube demand rises in July 2024 for third time in four months.

·        Rising demand boosts attraction for global blenders to prioritise Latin America market, when consumption is shrinking in US and Europe.

·        Latin America's rising demand contrasts with lower base oils supply from regional refiners and from US shipments to the region.

·        US base oils exports to South America fall to close to eleven-month low in July 2024.

·        Lower regional output and drop in shipments from US leave supply lagging demand for fifth month in July 2024.

·        Dynamic increases importance of steady-to-higher base oils output from regional refiners.

·        Any further rise in Latin America’s lube demand would increase further the region’s reliance on supplies from overseas markets.

·        That growing reliance could be less visible in coming months amid likely seasonal slowdown in demand in Q4 2024.

·        That growing reliance is likely to become more apparent in 2025 if demand continues to rise.

·        Mexico’s lube demand falls for third straight month in July 2024, but pace of contraction slows sharply from previous two months.

·        Any extension of that trend would suggest the prolonged slide in Mexico’s lube consumption is bottoming out.

·        Europe’s base oils demand could get support as seasonal pick-up in consumption magnifies impact of buyers’ low stocks.

·        Demand could get additional support from signs of smaller-than-usual build-up of surplus base oils supplies in Europe at start of Q3 2024.

·        Smaller-than-usual supply-build curbs pressure on sellers to take action to clear large volumes. 

·        Even so, expectations of sufficient supplies and high base oils prices relative to feedstock costs sustain incentive for blenders to procure smaller volumes more frequently.

·        Europe’s Group II base oils prices hold firmer relative to Group I, extend rise vs US/Asia prices.

·        Relative price strength points to tighter Group II supply/firmer demand fundamentals, despite completion of regional plant maintenance work at start of Q2 2024.

·        Europe’s lube demand growth stays uneven in July 2024.

·        France’s lube demand rises in July 2024 for first time in three months; Spain’s lube demand rises in July 2024 after falling the previous month.

·        Lack of sustained recovery in demand incentivizes blenders to maintain low base oils/lube stocks.

·        Low stocks magnify impact of seasonal rise in lube demand in late-Q3.

·        Low stocks curb blenders’ ability to put off procuring base oils supplies even after slide in feedstock costs raise concern about exposure to lower base oils prices.

·        Demand for Group I base oils in the Middle East could stay firmer amid signs a pick-up in shipments from Europe and Asia to the region in early Q3 2024 consisted more of premium-grade base oils.

·        Exports from continental Europe to the UAE consisted mostly of supplies from the Netherlands, with increasingly limited volumes from Italy.

·        Italy was previously a key supplier of Group I base oils for the UAE.

·        CFR UAE Group II heavy-grade premium to Group I base oils price narrows sharply over last two months.

·        Narrower premium adds to signs of increasingly tight Group I supply.