Americas/EMEA base oils demand outlook: Week of 7 April

·         US base oils demand could weaken in face of widespread market volatility and slumping crude prices.

·         Any slowdown in demand would be at a time of year when consumption typically gets a seasonal boost.  

·         More muted demand would cushion impact of round of base oils plant maintenance work.

·         More muted demand would curb refiners’ leverage to target firmer margins.

·         More muted demand instead puts pressure on refiners to respond more rapidly to any sustained drop in crude oil prices.

·         Buyers’ expectations of such price adjustments could add to slowdown in demand.

·         More muted domestic demand would put pressure on refiners to sustain firm export volumes to limit any build-up of surplus supplies.

·         Pressure to sustain firm export volumes keeps pressure on US export prices.

·         US Group II export prices maintain unusually steep discount to ex-tank Singapore prices.

·         Steepening discount at start of Q2 2025 contrasts with narrowing US Group II export price discount to ex-tank Singapore prices from end-Q1 2024.

·         US base oils imports as share of domestic demand continues to rise in Jan 2025.

·         Trend points to rising domestic Group III base oils consumption.

·         Rising Group III base oils consumption, combined with US’ sliding total base oils/lube consumption, compounds downward pressure on demand for other base oils grades.

·         Dynamic likely to sustain need to maintain high base oils exports even if domestic demand were firmer.

·         Need to maintain high base oils exports keeps pressure on US export prices to hold at levels that sustain regular arbitrage shipments.

·         Need to maintain high base oils exports increases importance of outlets like Mexico to absorb large portion of those shipments.

·         Any slowdown in Mexico’s demand for US base oils would raise prospect of US refiners facing choice of adjusting output or adjusting export destinations.

·         Latin America’s base oils demand could face pressure from concern about slower-than-expected economic activity.

·         Concern about reliance on US for most of its base oils imports could prompt region’s buyers to seek to diversify their supply sources.

·         Any such moves could add to slowdown in demand for US supplies.

·         Uncertainty about demand could incentivize blenders to maintain lower stocks and to top up supplies more frequently.

·         Argentina’s lube demand edges up in Feb 2025 for third time in four months.

·         Recovery in demand should incentivize blenders to hold larger stocks.

·         Concern about economic growth outlook could instead sustain attraction of holding lower inventories.

·         Europe’s base oils demand could turn more cautious in response to market volatility.

·         Buyers could seek to keep stocks at lower levels to limit exposure to any abrupt change in end-user demand or base oils trade flows.

·         Buyers would need to balance those concerns with need to maintain sufficient stocks to cover seasonal pick-up in demand and any boost from recent signs of improving economic activity in the region.

·         Any improvement in lube consumption would follow signs of steadier demand throughout the region late last year and early this year.

·         France’s lube demand edges lower in Jan 2025, reversing rise in consumption in Dec 2024.

·         Trend still adds to signs of Europe’s lube demand contraction bottoming out.

·         Europe’s Group I base oils prices strengthen vs Group II prices to firmest in more than four months.

·         Narrower Group I price-discount to Group II prices points to still-firm buying interest in Group I base oils even with tighter supply and increasingly stringent lube specification requirements. 

·         Europe’s limited surplus base oils supply and high prices relative to other markets likely to curb overseas demand for region’s base oils.

·         Any moves by overseas buyers to seek to diversify their supply sources could conversely boost buying interest in markets like Latin America.