Americas/EMEA base oils demand outlook: Week of 30 Sept

·        US base oils demand could see earlier-than-usual seasonal slowdown as buyers and distributors prioritize consumption of existing inventories first.

·        Buyers and distributors’ inventories could be higher than usual after they built up additional stocks as buffer against weather-related supply disruptions.

·        Those weather-related disruptions have been more muted than expected.

·        Concern about further downward price-pressure could add to buyers’ incentive to minimize any requirements for additional supplies.

·        US Group III 4cSt price premium to Group II N100 price stays unusually narrow.

·        Narrow premium could boost buying interest in Group III base oils, cushioning any slowdown in demand compared with Group II base oils.

·        Falling US export prices make less attractive the shipment of arbitrage shipments to Latin America from other regions like Asia.

·        Dynamic could boost Latin America’s demand for US supplies, cushioning impact of likely seasonal slowdown in outright requirements.

·        Signs of steady-to-firm lube consumption in the region could further limit size of any dip in requirements.

·        Brazil’s lube demand holds firm in Aug 2024 amid sustained rise in consumption since mid-2023.

·        Firm lube consumption sustains requirements for higher base oils supply during Q3 2024.

·        Prospect of seasonal slowdown in lube consumption in Q4 2024 likely to ease pressure on base oils supply to keep pace with demand.

·        Argentina’s lube demand extends slide for tenth month in Aug 2024, but industrial oil lube demand falls at slowest pace this year.

·        Signs of improving industrial oils consumption coincide with slump in stocks of the lubricants.

·        Extension of trend could trigger more sustained pick-up in production of industrial lubricants over coming months to at least replenish depleted stocks.

·        Ongoing slide in automotive lubricants and high stocks likely to incentivize blenders to continue to cut production of those lubricants.

·        Dynamic raises prospect of pick-up in demand for base oils to produce industrial oils, further drop in demand for base oils for automotive oils production.

·        Europe’s base oils demand could face additional slowdown until buyers are confident that a round of price adjustments has ended.

·        More competitive Group I prices could then support pick-up in demand for the grade.

·        Signs of healthy availability and weak lube demand could limit any such rise in demand.

·        Refiners could instead seek to redirect more supplies to overseas markets, especially in view of increasingly strong Group I export prices relative to regional prices.

·        Europe Group I export prices were firm relative to domestic prices in Q2 2024 especially because of tighter supply-demand fundamentals.

·        Group I export prices are even firmer vs domestic prices at end-Sept 2024 even with weaker supply-demand fundamentals.

·        Dynamic could incentivize overseas buyers to hold back in anticipation of adjustment in export prices.

·        Europe’s Group I base oils exports to markets outside the region already rise in July 2024 from year-earlier levels for first time in six months to six-month high.

·        Rise in exports follows slump in shipments to non-EU markets during H1 2024, while Group I exports to markets in Europe surge during that time.

·        Change in dynamics points to rise in surplus supply amid weaker regional demand.

·        Signs of ongoing contraction in Europe’s lube consumption through summer months compounds seasonal dip in demand, boosting availability of surplus supplies.

·        Italy’s lube demand falls to three-year low in Aug 2024 as slowdown in Europe’s lube consumption extends through Q3 2024.

·        Prospect of regional lube demand weakness extending through rest of 2024 could prompt blenders to trim further their already-lower procurement plans.

·        Prospect of extended regional lube demand weakness could free up additional Group I supplies for markets outside Europe unless base oils output falls.

·        Recent shipment from Mediterranean region to Nigeria in Sept 2024 points to pick-up in such supplies.

·        Buyers could trim their procurement of Group II base oils following surge in the product’s premium to Group I base oils.

·        Buyers could hold back, with wider Group II premium spurring concern that prices could also face an adjustment.

·        More muted demand and improving supply in US and Europe provide opportunity for buyers in Africa to replenish stocks.

·        Demand could be firmer after global base oils exports to Africa fall in July 2024 for sixth straight month from year-earlier levels on sustained slowdown in shipments from US.

·        Slowdown in US shipments contrasts with steadier flows from Europe, highlighting volatility of supplies from US.

·        Contrast between volatile supplies from US and steadier flows from Europe boosts attraction for buyers to procure more supplies from Europe.

·        Europe’s shrinking base oils production capacity could complicate such moves.

·        Dynamic boosts incentive for buyers in Africa to turn instead to shipments from other sources that can ensure stable supplies.