Americas/EMEA base oils demand outlook: Week of 2 Dec

·        US base oils demand set to stay muted over coming weeks amid year-end slowdown.

·        Demand likely to revive at start of new year as buyers move to replenish depleted stocks.

·        Any signs of steadier base oils prices and more manageable supply-build could provide additional support.

·        Any pick-up in demand could stay limited as plentiful availability gives buyers flexibility to procure smaller volumes more frequently.

·        Premium of US Group II posted prices to spot prices widens close to multi-year high.

·        Widening premium could add to preference for buyers to procure smaller volumes when they start to replenish stocks.

·        Sustained fall in US export prices in recent months boosts arbitrage opportunities to markets like Africa.

·        Several more cargoes load from US in recent weeks before heading to Nigeria.

·        Cargoes add to increasingly regular shipments from US to Nigeria in recent months.

·        Latin America’s base oils demand could hold relatively steady if signs of more balanced fundamentals in key markets like Brazil extend through year-end and early next year.

·        Any sharp pick-up in region’s imports in Q4 2024 would by contrast increase prospect of large supply-build at a time when demand faces seasonal slowdown.  

·        Latin America’s lube demand already likely extended its year-on-year fall in Oct 2024 as slide in Argentina’s lube consumption gathers pace.

·        Protracted and steep slide in lube consumption adds to blenders’ incentive to trim inventories; demand weakness also complicates such moves.

·        Sliding demand incentivizes blenders and distributors to maintain low base oils stocks, and to procure smaller volumes more frequently from domestic sources.

·        Dynamic raises prospect of curbing for longer any significant pick-up in demand for base oils supplies from overseas markets.

·        Argentina’s base oils imports stay low in Oct 2024, with almost all the supplies originating from the US.

·        Trend highlights country’s weak demand.

·        Country’s weak demand magnifies need for US especially to maximise its share of Argentina’s imports to help manage its own year-end supply-build.

·        Higher share of imports from US in Oct 2024 highlights more competitive prices for US supplies compared with earlier in the year.

·        US base oils demand from overseas buyers could get further boost from any extension of slide in exports from Europe to non-EU markets into Q4 2024.

·        Any such trend would follow slump in Europe’s exports to non-EU markets to three-year low in Sept 2024.

·        Europe’s base oils demand could get a boost early next year, when lube demand typically rises strongly from month of December.

·        Signs of ongoing slide in Europe’s lube demand in Q4 2024 could deepen dip in base oils requirements at year-end.

·        Italy’s lube demand falls in Oct 2024 for fifth time in six months, adding to such signs.

·        Ongoing slide in Europe’s lube demand in Q4 2024 raises prospect of slowdown extending at least into Q1 2025.

·        Shrinking demand could cut size of seasonal pick-up in lube consumption at start of 2025.

·        Such a scenario, and signs of healthy availability of base oils supply, could incentivize blenders to hold off moves to replenish stocks for as long as possible.

·        Any subsequent moves to replenish stocks could then consist of smaller volumes to cover immediate requirements.

·        Europe’s Group I base oils demand faces seasonal slowdown.

·        Europe had been increasingly frequent destination for larger shipments from Turkey in H2 2024.

·        November-loading cargo from Turkey moves instead to Nigeria.

·        Shipment to Nigeria points to insufficient buying interest in Europe for the supplies.

·        Overseas demand for Europe’s Group I base oils could get boost following fall in export prices at end-Nov 2024.

·        Arbitrage to markets like Middle East and India stays hard to work even with drop in prices.

·        Arbitrage to markets like Nigeria already faces growing competition from raft of suppliers in other regions.