Americas/EMEA base oils demand outlook: Week of 4 August

·         US base oils demand likely to stay lower amid signs of healthy availability of supply.

·         Healthy availability of supply, buyers’ sufficient stocks and seasonal slowdown in consumption incentivize buyers to hold back.

·         Ongoing fall in US base oils export prices adds to signs of weaker domestic demand.

·         US export prices fall in recent weeks even after slump in US base oils stocks during Q2 2025.

·         Stocks fall to multi-year low in May 2025 as surge in domestic demand counters rise in base oils output.

·         US demand duly outpaces supply in May 2025 for fourth straight month.

·         Fall in US export prices in recent weeks suggests rise in demand in May 2025 was temporary.

·         Fall in US export prices points to sufficiently weak domestic demand to trigger rapid rise in surplus supplies.

·         Fall in US export prices and their widening discount to domestic prices could boost expectations of adjustment in domestic prices, adding to buyers' preference to hold back.

·         Fall in US export prices supports stronger demand in overseas markets like India and Middle East.

·         Those markets may need to absorb additional volumes if buying interest slows in Latin America.

·         Argentina’s lube demand falls in June 2025 for fourth month from year-earlier levels.

·         Argentina’s lube output falls in June 2025 for seventh month from year-earlier levels.

·         Shrinking demand/output adds to more mixed signals of state of Argentina’s economic recovery.

·         Sustained contraction incentivizes blenders to trim inventories of finished lubricants and base oils.

·         Argentina’s base oils imports almost pause in June 2025, adding to sharp slump in shipments in H1 2025.

·         Sustained fall in Argentina’s imports forces US suppliers to instead target other markets in South America.

·         Any slowdown in demand in those other markets could compound pressure on US suppliers and force pick-up in spot shipments to more distant outlets like Africa and India.

·         Europe’s base oils demand could start to get support from seasonal recovery in lube consumption in Sept 2025.

·         Expectations of sufficient base oils supplies and steady-to-weak lube consumption could incentivize blenders to continue to maintain low stocks.

·         Even so, size of rise in lube demand in month of September from August, after slump in demand in August from July, could create procurement and inventory-management challenges.

·         Signs of steadier lube consumption in recent months could add to blenders’ comfort with holding more inventories.

·         Italy’s lube demand rises in June 2025 for third time in four months

·         Rising lube demand coincides with improvement in Italy's manufacturing confidence index that extends into July 2025.

·         Correlation between Italy's lube demand growth and manufacturing confidence index raises prospect of further pick-up in lube consumption in July 2025.

·         Any rise in surplus Group I supplies in Europe would boost importance of pick-up in overseas demand to absorb those surplus volumes.

·         Arbitrage from Europe to markets like India and Middle East stays shut even with recent drop in Europe Group I light-grade export-prices.

·         Arbitrage stays shut despite firmer demand for Group I base oils in those overseas markets.

·         Closed arbitrage suggests Europe’s Group I supply remains relatively balanced for now.

·         Closed arbitrage conversely speeds up any rise in surplus volumes.

·         Europe’s Group II base oils price-premium to Group I base oils continues to edge lower from recent elevated levels.

·         Higher Group II price-premium in Q2 2025 coincided with seasonally-firmer lube demand and Group I and Group III plant-maintenance work, boosting requirement for alternative supplies.

·         Lower Group II price-premium in recent weeks coincides with seasonal slowdown in lube demand and completion of Group I and Group III plant-maintenance work.

·         Dynamic could suggest Group II demand and price-differentials rose because of lower availability of other grades.

·         Improving availability of other grades could continue to reverse that dynamic.

·         Overseas demand for Europe’s Group II base oils in markets like southeast Asia could also start to face pressure following completion of plant-maintenance in Asia and with imminent start-up of new capacity in that region.