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

·        US base oils demand could ease as refiners’ lower contract prices add to signs of muted end-user consumption and completion of stock-building.

·        This time a year ago, US refiners raised posted prices in Aug 2023 and Sept 2023.

·        The price-cut this year contrasts with those moves, takes place in middle of peak Atlantic hurricane period.

·        Seasonal pick-up in demand in final weeks of third quarter could be more muted as buyers work down stocks and wait for prices to stabilize.

·        Group II base oils demand could face additional pressure from their increasingly narrow discount to Group III base oils prices.

·        Overseas demand for US base oils supplies likely to stay more muted as high prices keep the arbitrage shut to markets like India.

·        High US prices also boost incentive for buyers in Latin America to target supplies from Asia-Pacific.

·        Prospect of seasonal slowdown in Latin America’s lube demand in final months of 2024 could curb further the buying interest from that region.

·        Slowdown in lube demand would curb base oils requirements, adding to dip in demand for base oils from US.

·        Arbitrage shipments from Asia would compound the slowdown in demand for base oils from US and increase importance of closing the arbitrage.

·        Brazil’s base oils demand for overseas supplies could ease in H2 2024 compared with H2 2023, when plant-maintenance work boosted country’s reliance on imports.

·        Imports account for more than 71% of Brazil’s supply in H2 2023, up from typical levels of close to 60%.

·        Imports’ share of supply unlikely to return to that higher level in H2 2024.

·        Dynamic would curb prospect of repeat of surge in US base oils exports to Brazil that took place in H2 2023.

·        Open arbitrage to move shipments from Asia to Brazil could further curb requirements for US shipments.

·        Demand for overseas supplies could still stay higher than usual if domestic consumption extends its rise.

·        Any such higher-than-usual requirements could sustain buying interest in shipments from Asia if the arbitrage stays open.

·        Europe’s base oils demand could get boost from seasonal rise in lube demand in month of September from the previous month.

·        Signs of sufficient base oils supply, and high prices, could incentivize buyers to continue to procure smaller volumes more frequently.

·        Europe’s demand for Group I base oils shows signs of holding firm even with plentiful supply and competitive prices for premium-grade base oils.

·        Firm demand cuts availability of Group I base oils for other regions.

·        Italy’s lube demand rises in July 2024 for first time in three months.

·        Firmer consumption extends period of uneven demand growth throughout Europe so far this year.

·        Scant signs of strong or sustained recovery in demand, and sufficient base oils supplies, incentivize region’s blenders to maintain lower stocks.

·        European blenders’ stock-management faces challenge of seasonal slump in demand in month of August from July, followed by rebound in demand in September from August.

·        Blenders’ higher stocks would dull the impact of that monthly demand volatility.

·        Blenders’ lower stocks would magnify the impact of the monthly demand volatility.

·        Europe’s lube demand shows signs of being weaker than expected in Q2 2024 as Germany’s domestic consumption extends steep slide.

·        Speed of contraction outpaces slowdown in other markets like Italy and Spain

·        Trend extends drop in Germany’s share of Europe's lube consumption.

·        Germany’s weak domestic demand contrasts with surge in country’s lube exports in first five months of 2024.

·        Rising exports counter impact of shrinking domestic demand, support pick-up in lube production since start of 2024.

·        Rising lube production supports rise in base oils requirements, despite sliding domestic lube consumption.