· US, Latin America base oils demand faces seasonal slowdown, expectations of ready availability of supply.· US gasoline demand rises in 2H Sep 2023 for twenty-sixth week in twenty seven, at slowest pace in six weeks..· US base oils demand likely to get support in short term from firm prices and relatively balanced fundamentals.· Demand likely to ease within coming month as market faces prospect of seasonal slowdown in consumption and rise in surplus supply in weeks before and after year-end.· Blenders’ moves to raise finished-product prices in October could trigger firmer end-user demand in the weeks preceding the price increases.· Prospect of mixed year-on-year lube demand growth in Americas set to coincide with seasonal dip in consumption over coming months.· Lower demand increases pressure on US refiners to export more surplus supplies or to cut production.· Demand from Mexico has been holding firm even amid ongoing slowdown in finished lube demand.· When arbitrage works, Mexico’s demand for light-grade base oils as a fuel extender exceeds its demand for base oils to produce lubricants.· The arbitrage has been working.· Rising US export prices makes the arbitrage less attractive than a few weeks ago, ICIS data shows.· Any slowdown or closure of that arbitrage would force US refiners to find other ways to remove surplus light-grade suppies.· Argentina’s August lube demand falls for sixth time in seven months..· Argentina’s falling lube demand reflects mixed trend throughout Latin America, boosts attraction for US refiners to focus on Brazil.· Argentina’s lube demand likely to face more pressure in face of shrinking economic growth and as high inflation curbs room to cut interest rates. .· Europe’s base oils demand from regional buyers likely to hold steady as buyers maintain low stocks and replenish them more frequently.· Europe’s base oils demand from overseas buyers likely to be more muted as supplies from other regions cover more of their requirements.· Europe’s lube demand likely to hold in narrow range in three months to November, before seasonal slide in consumption in December..· Slowdown in lube demand could have smaller impact than last year when blenders focused on clearing overhang of base oils feedstock supplies that they procured earlier at higher prices.· Blenders’ lower inventories likely to trigger more regular moves to top up supplies, even if volumes remain small..· Europe’s base oils prices and margins in Q2 2023 lag year-earlier levels despite slump in regional supply in June to lowest in more than four years..· Lower base oils margins coincide with sustained slowdown in regional base oils and lube demand, especially compared with 1H 2022.· Prospect of ongoing slowdown in regional lube demand likely to keep pressure on base oils margins and on managing base oils supply carefully to avoid additional pressure on margins. .· Europe’s falling Group III prices reflect region’s weak supply-demand dynamics, raise prospect of more shipments moving to other markets instead.· Slump in premium-grade shipments from Mideast Gulf to Europe in July reflect such moves..· But shipments to Europe show signs of reviving in August and September..· Europe’s July base oils exports to Nigeria slump to three-year low..· Drop in supplies highlights more limited number of Group I sources in Europe/Baltic market and less regular availability of surplus supplies to move to Nigeria.· Trend boosts incentive for West Africa buyers to line up alternative supply sources.· Trend provides opportunity for alternative supply sources to target West Africa market.· There are signs of some such alternative supply sources appearing, such as Turkey and Singapore, as well as more supplies from US..· Excluding last year’s unusual surge, global base oils shipments to Kenya show signs of trending higher this year, with Netherlands the key source of supplies..· Trend highlights growing demand for imported base oils in some key Africa markets..· Demand for overseas supplies in other African markets such as Egypt show signs off sustained contraction..· Trend reflects combination of slower lube consumption and drop in exports from Europe.· Trend already attracted growing volumes from other sources in place of supplies from Europe..· Thailand’s August base oil exports include largest shipment to UAE in almost three years..· Increasingly steady flow of arbitrage Group I shipments from Thailand to Mideast Gulf highlight that region’s firm demand, China’s weak demand, and Europe’s tight supply.· Flows from Thailand to outlets like Mideast Gulf could slow following imminent closure of another Group I plant in Japan..Global base oils - week of Oct 2: Price outlook - arbitrage
