· US base oils demand likely to get support from seasonal pick-up in requirements that coincides with round of plant maintenance work.· Mostly-steady outright base oils prices so far this year contrast with higher prices in other markets.· Steady export base oils values vs VGO so far this year contrast with slump, then surge in base oils values from H2 March 2024..· Any extension of steady prices and steady margins could point to weaker-than-expected seasonal pick-up in demand.· Seasonal rise in demand could be more muted ahead of expected imposition of additional tariffs in early-April 2025.· Scheduled plant maintenance work and concern about tariff-related trade disruptions could conversely incentivize buyers to lock in more supplies of some products like Group III base oils.· Ongoing shipment of large cargoes from US to markets like West Africa point to persistent surplus volumes even at a time when fundamentals are typically tighter.· Removal of those surplus volumes could provide refiners with more leverage to adjust prices in response to firmer domestic supply-demand fundamentals..· Latin America’s base oils demand for US cargoes could get support from competitive prices vs other regions and tight supply in those regions.· Buying interest could get further boost from signs of firm supply-demand fundamentals in the region.· Latin America’s lube demand exceeds base oils supply in Jan 2025 for third month..· Supply shortfall likely to leave blenders with depleted stocks early this year, speeding up their moves to replenish inventories.· Concern about impact of any tariffs on economic growth in markets like Mexico instead boosts incentive for buyers to maintain lower inventories.· Concern about impact of any tariffs or other trade-related disruptions incentivizes buyers to curb any over-reliance on a single supply source.· Any such moves could limit size of any pick-up in demand for additional supplies from US.· Any such moves could be more feasible over coming year following expected improvement in availability of supply in Asia especially..· Any such moves to line up more supplies from Asia would also require arbitrage to open.· FOB Asia Group II cargo prices maintain narrow discount or premium vs US export prices, keeping arbitrage shut..· South Korea’s base oils exports to Latin America stay low in Feb 2025 for fourth time in five months, reflecting impact of closed arbitrage..· Dynamic suggests that any pick-up in arbitrage shipments from Asia to Latin America is unlikely to materialize at least for several more months.· Dynamic complicates any immediate moves to trim reliance on US for supplies..· Mexico’s base oils demand for finished lubricants production could face pressure from concern about extended drop in consumption.· Mexico’s lube demand already falls in Jan 2025 for eighth time in nine months on sustained dip in industrial oils consumption..· Uncertainty about tariff-related costs, and forecasts of slower economic growth, raise prospect of prolonging the slowdown in lube consumption..· Europe’s base oils demand likely to get support from seasonal pick-up in requirements, firm prices and relatively balanced supply.· Some signs of steadier lube consumption and improving confidence about economic outlook could provide further support.· Demand for Group III base oils could get additional support from prices that stayed unusually competitive vs Group II base oils since late-2024..· Europe’s Group I brightstock price stays unusually high relative to VGO, relative to other grades and relative to other regions..· High price incentivizes blenders to seek to adjust formulations in a way that cuts brightstock requirements and increases consumption of other grades instead..· Base oils demand in Middle East could rise in coming weeks after end of Ramadan and Iranian new year holidays.· Demand for supplies from Asia-Pacific could stay more muted after surge in shipments from South Korea to Middle East in Feb 2025..· Rise in shipments enables blenders to replenish lower stocks ahead of any pick-up in regional demand.· Rise in shipments gives blenders more leverage to hold back from locking in additional supplies at price levels that they deem to be too high.· Even so, buyers likely to be more reliant on pick-up in cargo volumes from Asia amid signs of lower-than-usual arbitrage flows from US and Europe.· Buyers also likely to need to procure additional supplies more frequently after drop in arbitrage flows slashes global exports to Middle East at end-2024 and early this year..· Drop in shipments curbs opportunity for buyers to build stocks with supplies at competitive price levels.· Dynamic could trigger more frequent procurement of smaller volumes over coming months..Latin America's Jan lube demand rises.Global exports to Middle East rise in Feb.Global base oils arb outlook: Week of 24 March.Global base oils margins outlook: Week of 24 March
