· US base oils demand typically starts to get a seasonal boost around this time of the year.· Signs of plentiful supply, and still-steep discount of domestic spot prices to posted prices, incentivize buyers to procure smaller volumes.· Lack of moves by other refiners to raise posted prices curbs any urgency from buyers to lock in more supplies.· Overseas demand for US supplies likely to get ongoing support from still-competitive prices vs supplies from other regions..· Latin America’s lube demand faces seasonal rise in month of March followed by slowdown in April.· Demand likely to hold relatively steady in Q2 2024 vs Q1 2024, stay well above Q4 2023 levels..· Demand for base oils supplies from US could still be lower than Q4 2023 because of recovery in Brazil’s base oils output, signs of higher production in Argentina..· Argentina’s January lube demand slumps to lowest since 1H 2020, when lockdowns slashed the country’s economic activity..· Fall in lube consumption and rising cost of base oils imports likely to cut demand for overseas supplies.· Trend adds to prospect of more widespread slowdown in Latin America’s demand for base oils from overseas markets at least during first few months of 2024.· Drop in demand contrasts with surge in US base oils exports to Latin America in Q4 2023.· Any such slowdown in demand adds to pressure on US base oils producers to redirect more surplus supplies to other markets.· Any such moves require that US base oil prices fall to or hold at levels that make arbitrage feasible to those other markets. .· Brazil’s January lube consumption rises, reversing a contraction in Dec 2023 and boosting base oils requirements..· Firmer lube demand could speed up the removal of a build-up of surplus base oils supplies at end-2023.· Even with firmer domestic demand, US base oils exports to Brazil would need to fall from unusually high levels in 2H 2023 to slow down or reverse the large supply-build in Q4 2023..· Europe’s base oils demand could rise more than expected if buyers deem supply to be tighter than expected.· Europe’s lower Group I base oils prices in Feb 2024 reflect ongoing demand weakness.· Trend suggests blenders are holding off replenishing stocks and prefer to maintain low inventories.· Trend magnifies impact of any surplus supplies even if size of surplus is lower than usual.· Trend suggests that demand would need to remain muted to avoid Group I base oils market facing possibility of supply-tightness.· Open arbitrage to move Group I supplies from Europe to Asia sustains steady buying interest in that region.· Recent arrival in Singapore of cargo from Greece shows that arbitrage already being worked.· Trend raises prospect of leaving Europe’s Group I supply tighter when seasonal demand picks up.· Europe’s Group III base oils demand could get a boost as gap between regional Group I/II and Group III prices continues to narrow..· Italy’s January lube consumption rises for eighth month, highlighting contrast with ongoing demand weakness in northern Europe.· Italy’s firm consumption set to add to country’s already-higher base oils imports requirements following upcoming closure of one of the country’s two virgin Group I base oils plants..· Falling supplies from Europe likely to incentivize East African markets like Kenya to line up more supplies from sources like Mideast Gulf and India.· Trend already began in 2023. · Trend likely to gather pace over coming year amid rise in production capacity in India and logistical proximity of supplies from Mideast Gulf. .· Nigeria’s demand for base oils from US/Europe could ease if shipments of large cargoes from Russia becomes more frequent.· One such cargo reached Nigeria in recent days..Asia base oils demand outlook: Week of March 4.Global base oils margins outlook: Week of March 4.Global base oils arb outlook: Week of March 4.Global base oils cargo flows: Week of March 4
· US base oils demand typically starts to get a seasonal boost around this time of the year.· Signs of plentiful supply, and still-steep discount of domestic spot prices to posted prices, incentivize buyers to procure smaller volumes.· Lack of moves by other refiners to raise posted prices curbs any urgency from buyers to lock in more supplies.· Overseas demand for US supplies likely to get ongoing support from still-competitive prices vs supplies from other regions..· Latin America’s lube demand faces seasonal rise in month of March followed by slowdown in April.· Demand likely to hold relatively steady in Q2 2024 vs Q1 2024, stay well above Q4 2023 levels..· Demand for base oils supplies from US could still be lower than Q4 2023 because of recovery in Brazil’s base oils output, signs of higher production in Argentina..· Argentina’s January lube demand slumps to lowest since 1H 2020, when lockdowns slashed the country’s economic activity..· Fall in lube consumption and rising cost of base oils imports likely to cut demand for overseas supplies.· Trend adds to prospect of more widespread slowdown in Latin America’s demand for base oils from overseas markets at least during first few months of 2024.· Drop in demand contrasts with surge in US base oils exports to Latin America in Q4 2023.· Any such slowdown in demand adds to pressure on US base oils producers to redirect more surplus supplies to other markets.· Any such moves require that US base oil prices fall to or hold at levels that make arbitrage feasible to those other markets. .· Brazil’s January lube consumption rises, reversing a contraction in Dec 2023 and boosting base oils requirements..· Firmer lube demand could speed up the removal of a build-up of surplus base oils supplies at end-2023.· Even with firmer domestic demand, US base oils exports to Brazil would need to fall from unusually high levels in 2H 2023 to slow down or reverse the large supply-build in Q4 2023..· Europe’s base oils demand could rise more than expected if buyers deem supply to be tighter than expected.· Europe’s lower Group I base oils prices in Feb 2024 reflect ongoing demand weakness.· Trend suggests blenders are holding off replenishing stocks and prefer to maintain low inventories.· Trend magnifies impact of any surplus supplies even if size of surplus is lower than usual.· Trend suggests that demand would need to remain muted to avoid Group I base oils market facing possibility of supply-tightness.· Open arbitrage to move Group I supplies from Europe to Asia sustains steady buying interest in that region.· Recent arrival in Singapore of cargo from Greece shows that arbitrage already being worked.· Trend raises prospect of leaving Europe’s Group I supply tighter when seasonal demand picks up.· Europe’s Group III base oils demand could get a boost as gap between regional Group I/II and Group III prices continues to narrow..· Italy’s January lube consumption rises for eighth month, highlighting contrast with ongoing demand weakness in northern Europe.· Italy’s firm consumption set to add to country’s already-higher base oils imports requirements following upcoming closure of one of the country’s two virgin Group I base oils plants..· Falling supplies from Europe likely to incentivize East African markets like Kenya to line up more supplies from sources like Mideast Gulf and India.· Trend already began in 2023. · Trend likely to gather pace over coming year amid rise in production capacity in India and logistical proximity of supplies from Mideast Gulf. .· Nigeria’s demand for base oils from US/Europe could ease if shipments of large cargoes from Russia becomes more frequent.· One such cargo reached Nigeria in recent days..Asia base oils demand outlook: Week of March 4.Global base oils margins outlook: Week of March 4.Global base oils arb outlook: Week of March 4.Global base oils cargo flows: Week of March 4