· US base oils demand likely to stay more muted as buyers’ moves to trim stocks outweigh impact of recent crude price volatility.· Seasonal slowdown in demand in domestic and overseas markets, and still-hard-to-work arbitrage to many of those markets, raise prospect of rise in surplus supply in domestic market.· Expectations of rising supply give buyers leverage to hold back even with recent jump in crude oil prices.· Demand also loses boost from stock-building that provided artificial support to demand in early-Q3 2024..· Stock-building in US market helps to boost demand in July-Aug 2024, countering fall in domestic and overseas demand..· Stock-building helps to absorb rise in surplus supply in July 2024.· Additional demand for stock-building flips to additional supply in recent weeks as buyers move to cut inventories.· Domestic demand unlikely to balance out loss of stock-building moves as market prepares for seasonal slowdown at year-end.· Dynamic puts onus on overseas demand to absorb rising volumes in order to curb any major supply-build over coming months.· Overseas demand likely to improve in response to lower US export prices.· US export prices remain at steep premium to prices in markets like India even after recent fall in outright US prices..· Overseas demand likely to rise more strongly if US export prices were closer to or at a discount to imported cargo prices in those markets.· Another cargo moves from US Gulf coast to India in early Oct 2024, following a similar shipment a month earlier.· Shipments point to some cargo prices at levels that are sufficient to attract buying interest from India.· US export Group II price differential to Europe prices slips further to widest discount since May 2024..· Widening discount boosts feasibility of moving more arbitrage shipments to Europe..· Latin America’s lube demand faces seasonal dip in demand in Q4 2024 followed by recovery from start of next year..· Latin America’s base oils demand could fall even more sharply because of lack of plant maintenance work in the region over coming months, especially compared with last year.· A sharper fall in base oils demand would further curb import requirements.· The scenario would complicate moves by overseas refiners to target the region with surplus volumes.· The scenario could instead prompt overseas refiners to move more supplies to other regions instead..· Europe’s base oils demand likely to stay cautious against backdrop of sufficient supply and weak finished lube consumption.· Blenders’ low stocks likely to sustain steady buying interest, even if for lower volumes.· Europe’s Group I export prices stay unusually firm relative to domestic prices..· Price-strength points to firm fundamentals, with tight supply and strong overseas demand.· But fundamentals are less firm.· That dynamic, and concern about exposure to an adjustment in export prices, could incentivize overseas buyers to hold back.· Europe’s Group II base oils price premium to Group I prices stays close to highest in more than a year and at narrow discount to Group III prices.· Dynamic could incentivize buyers to use more Group I and Group III base oils rather than Group II base oils..Asia base oils demand outlook: Week of 7 Oct.Global base oils margins outlook: Week of 7 Oct.Global base oils arb outlook: Week of 7 Oct.Global base oils cargo flows: Week of 7 Oct
