Americas/EMEA base oils - week of Dec 4: Demand outlook

·        US base oils demand could revive earlier than usual from start of 2024 as blenders replenish low stocks more frequently.

·        Recent round of US posted price-cuts eases buyers’ concern about exposure to lower prices, especially for Group II heavy grades.

·        Overseas demand for US supplies could get boost from increasingly competitive prices and more feasible arb opportunities.

·        Latin America’s base oils demand for finished lubricants could get support from firmer-than-expected lube demand in Q4 2023.

·        Latin America’s lube demand then seen extending rise in Q1 2024.

·        Firmer regional consumption partly reflects unexpectedly strong and sustained rise in Brazil’s lube demand into Q4 2023.

·        US refiners would be key beneficiaries of stronger-than-expected rise in lube demand in Latin America amid less workable arbitrage from Asia to Americas.

·        US could see pick-up in demand for Group II base oils from Europe if that market continues transition to using more of the premium-grade supplies.

·        US base oils exports to Europe fell in 2023 partly because of rise in regional production.

·        Any further rise in Europe’s demand for Group II base oils could require more supplies from overseas until regional production capacity rises.

·        Europe’s base oils demand could improve earlier than usual next year, reflecting blenders’ low stocks and signs that contraction in lube demand is slowing.

·        Europe’s lube demand faces seasonal slowdown at year-end. But pace of contraction from year earlier shows signs of slowing.

·        Europe’s lube demand faces prospect of stronger rise in Q1 2024 from Q4 2023 compared with Q1 2023 from Q4 2022.

·        Steadier-to-firmer demand could support earlier pick-up in blenders’ requirements to replenish low base oils stocks.

·        Europe’s Group III price premium to Group II prices falls to narrowest in more than a year.

·        Europe’s Group III price premium to Group I prices holds at narrowest in more than a year.

·        Trend could incentivize blenders to use more Group III base oils instead of Group I and Group II.

·        Europe’s Group I heavy-neutrals demand could get boost amid widening SN 500 discount to Group II heavy-grade prices.

·        Italy’s October lube demand rises for fifth month as higher consumption of industry-related oils outweighs weaker consumption of passenger-car engine oils.

·        Rising industrial oils consumption and weaker PCMO demand contrasts with year to mid-2023, when roles were reversed.

·        Trend points to slowdown in services sector, steadier activity in industrial sector.

·        Italy’s firmer demand extends growing contrast between reviving consumption in Mediterranean region and still-weak demand in northern Europe.

·        Trend curbs slowdown in Europe’s lube demand over past year, points to steadier consumption over coming months.

·        Germany’s lube demand extends steep slide in Sept 2023.

·        Sustained fall in demand in Europe’s largest market could push back timing and strength of any recovery in region’s lube consumption.

·        Fall in Germany’s domestic lube demand exceeds pace of fall in its lube exports for third time in four months.

·        Trend points to stronger lube demand in regional markets than in Germany’s domestic market.

·        Global base oils exports to Egypt fall in Q3 2023 to lowest in more than four years.

·        Slowdown in shipments points to weaker base oils and lube consumption in the country.

·        Ongoing pause in shipments from Asia to Egypt highlight Asia’s more balanced supply and the less attractive arbitrage to Europe and North Africa.