· Americas’ base oils demand likely to remain more muted as buyers face little urgency to replenish stocks.· Wide gap between US domestic spot and posted prices adds to incentive for domestic buyers to hold back.· Demand likely to get more support when buyers deem prices are likely to hold firm or rise and if concerns rise about availability of supply.· Narrowing gap between US domestic and export prices could be early indication that supply-demand fundamentals are starting to change.· US’ competitive export prices maintain arbitrage opportunities to multiple overseas markets.· Trend extends pattern that was instrumental in limiting supply-build during Q4 2023..· US’ November base oils/lube demand falls to four-month low as surge in exports cushions impact of slump in domestic consumption..· Base oils exports account for more than 70pc of US demand in November and more than 50pc every month since March 2023.· Exports exceeded 50pc of demand just two times in 2022.· Trend highlights importance of overseas outlets as key growth markets for US supplies.· Trend highlights importance of maintaining steady flows to those markets to avoid large build-up of surplus supplies in domestic market.· Weakness of domestic US demand in Nov 2023 suggests blenders may have brought forward procurement plans before round of lubricant-price increases came into effect from Oct 2023.· Subsequent fall in base oil posted prices in Dec 2023, and expectations of such a move, added to incentive for blenders to hold back in Nov 2023..· Like other regions, Latin America’s lube demand likely to peak in March before trending lower in Q2 2024..· Pace of drop in demand in Q2 2024 from Q1 2024 likely to be slower than in Europe and Asia.· Trend could boost attraction of targeting Latin America with more surplus base oils supplies in Q2 2024..· Argentina’s December lube demand falls for fifth time in six months as economic activity slows sharply.· Falling lube demand cuts country’s base oils requirements.· Argentina’s steep currency depreciation increases costs of overseas base oils supplies.· Trend likely to boost requirements for domestic base oils supplies, cut demand for overseas supplies.· Any such slowdown in demand for overseas base oils supplies would have largest impact on the US.· US suppliers can maintain firmer volumes to Latin America by boosting share of smaller market.· Argentina’s base oils imports from South Korea rebound in Q4 2023 despite less feasible arbitrage and competitive US prices.· Any extension of that trend would compound slowdown in demand for US supplies.· That trend is less likely to continue in early 2024 as more South Korean supplies cover seasonal rise in demand in markets like China and southeast Asia.· Brazil’s base oils demand for overseas supplies likely to fall after surge in imports extends through to end-2023..· Europe’s lube demand set to rise steadily throughout Q1 2024 before easing in Q2 2024..· Blenders’ lower inventories likely to magnify impact of seasonal pick-up in demand, even if it remains weaker than previously.· Blenders’ higher stocks in early 2023 and moves to cut inventories dampened impact of seasonal rise in demand early last year.· Blenders likely to maintain lower inventories even as they replenish stocks amid ongoing signs of muted finished lube demand.· Blenders’ expectations that they can secure supplies as and when required adds to preference to maintain lower stocks.· Demand for Europe’s surplus Group I base oils supplies could get boost from open arbitrage to Asia, where supply is tight..· Europe’s base oils exports to key markets in Africa fall in late 2023 more because of drop in supply than because of unworkable arbitrage opportunities.· Trend highlights structural drop in Europe’s surplus base oils supply, boosts incentive for US refiners to target Africa with more supplies.· Pick-up in shipments from US to West/North Africa in recent weeks points to such a move.· Rebound in shipments to Egypt from Europe/US in recent weeks follows sharp slowdown in flows to the country at end-2023..Asia base oils - week of Feb 5: Demand outlook.Global base oils - week of Feb 5: Demand outlook.Global base oils - week of Feb 5: Price outlook - arbitrage.Global base oils - week of Feb 5: Price outlook - margins
· Americas’ base oils demand likely to remain more muted as buyers face little urgency to replenish stocks.· Wide gap between US domestic spot and posted prices adds to incentive for domestic buyers to hold back.· Demand likely to get more support when buyers deem prices are likely to hold firm or rise and if concerns rise about availability of supply.· Narrowing gap between US domestic and export prices could be early indication that supply-demand fundamentals are starting to change.· US’ competitive export prices maintain arbitrage opportunities to multiple overseas markets.· Trend extends pattern that was instrumental in limiting supply-build during Q4 2023..· US’ November base oils/lube demand falls to four-month low as surge in exports cushions impact of slump in domestic consumption..· Base oils exports account for more than 70pc of US demand in November and more than 50pc every month since March 2023.· Exports exceeded 50pc of demand just two times in 2022.· Trend highlights importance of overseas outlets as key growth markets for US supplies.· Trend highlights importance of maintaining steady flows to those markets to avoid large build-up of surplus supplies in domestic market.· Weakness of domestic US demand in Nov 2023 suggests blenders may have brought forward procurement plans before round of lubricant-price increases came into effect from Oct 2023.· Subsequent fall in base oil posted prices in Dec 2023, and expectations of such a move, added to incentive for blenders to hold back in Nov 2023..· Like other regions, Latin America’s lube demand likely to peak in March before trending lower in Q2 2024..· Pace of drop in demand in Q2 2024 from Q1 2024 likely to be slower than in Europe and Asia.· Trend could boost attraction of targeting Latin America with more surplus base oils supplies in Q2 2024..· Argentina’s December lube demand falls for fifth time in six months as economic activity slows sharply.· Falling lube demand cuts country’s base oils requirements.· Argentina’s steep currency depreciation increases costs of overseas base oils supplies.· Trend likely to boost requirements for domestic base oils supplies, cut demand for overseas supplies.· Any such slowdown in demand for overseas base oils supplies would have largest impact on the US.· US suppliers can maintain firmer volumes to Latin America by boosting share of smaller market.· Argentina’s base oils imports from South Korea rebound in Q4 2023 despite less feasible arbitrage and competitive US prices.· Any extension of that trend would compound slowdown in demand for US supplies.· That trend is less likely to continue in early 2024 as more South Korean supplies cover seasonal rise in demand in markets like China and southeast Asia.· Brazil’s base oils demand for overseas supplies likely to fall after surge in imports extends through to end-2023..· Europe’s lube demand set to rise steadily throughout Q1 2024 before easing in Q2 2024..· Blenders’ lower inventories likely to magnify impact of seasonal pick-up in demand, even if it remains weaker than previously.· Blenders’ higher stocks in early 2023 and moves to cut inventories dampened impact of seasonal rise in demand early last year.· Blenders likely to maintain lower inventories even as they replenish stocks amid ongoing signs of muted finished lube demand.· Blenders’ expectations that they can secure supplies as and when required adds to preference to maintain lower stocks.· Demand for Europe’s surplus Group I base oils supplies could get boost from open arbitrage to Asia, where supply is tight..· Europe’s base oils exports to key markets in Africa fall in late 2023 more because of drop in supply than because of unworkable arbitrage opportunities.· Trend highlights structural drop in Europe’s surplus base oils supply, boosts incentive for US refiners to target Africa with more supplies.· Pick-up in shipments from US to West/North Africa in recent weeks points to such a move.· Rebound in shipments to Egypt from Europe/US in recent weeks follows sharp slowdown in flows to the country at end-2023..Asia base oils - week of Feb 5: Demand outlook.Global base oils - week of Feb 5: Demand outlook.Global base oils - week of Feb 5: Price outlook - arbitrage.Global base oils - week of Feb 5: Price outlook - margins