· Americas’ base oils demand could be more mixed as competitive US export prices cushion impact of likely slowdown in regional requirements.
· Domestic US demand could remain more muted as steep US export price discount to domestic prices points to sufficient surplus supply, raising expectations of downward pressure on domestic prices.
· Expectations of sufficient supply, steady-to-lower prices curb any urgency to replenish stocks.
· US posted price premium to domestic spot prices stays wider than usual, ICIS data shows.
· Wide premium raises expectations of rise in spot prices or fall in posted prices.
· Weaker fundamentals at start of year make fall in posted prices more likely than rise in spot prices, adding to buyers’ incentive to hold back.
· Demand in Latin America for heavy-grade base oils from Asia could see slowdown as Asia price discount to US Group II export prices narrows sharply.
· Trend boosts attraction of US supplies instead.
· US’ October base oils/lube demand outpaces supply for fifth time in six months as sustained rise in exports counters weak domestic demand.
· Trend reflects US refiners’ increased focus on export markets to maintain supply-demand balance.
· Strong overseas demand in turn reflects benefit of competitive US export base oils prices, especially compared with prices in 2022.
· Trend highlights importance of maintaining competitive prices to sustain firm overseas demand and to avoid a major supply-build at end-2023/early 2024.
· Argentina’s November lube demand falls for fourth time in five months.
· Lube consumption likely to extend slowdown over coming months in face of even slower economic growth.
· Slowdown would coincide with fall in Mexico’s demand for base oils from overseas markets and likely drop in Brazil’s demand for base oils imports following completion of plant maintenance work.
· Synchronised slowdown in demand in Latin Americas’s largest markets would complicate any moves by US refiners to move more surplus base oils supplies to the region.
· Europe’s base oils demand faces pressure from buyers’ typical caution at start of new year.
· Demand could get support earlier than usual amid signs of more balanced fundamentals than same time a year ago.
· Europe’s October lube demand rises for first time in fourteen months.
· Demand rises on shrinking pace of slowdown in Germany and France, combined with firm consumption in Mediterranean market.
· Steadier demand in Europe would contrast with end-2022 and curb prospect of significant build-up of surplus base oils supplies at year-end.
· Italy’s November lube demand rises for sixth month.
· Sustained recovery in lube demand in Mediterranean region cuts blenders’ feedstock inventories.
· Blenders’ moves to maintain lower feedstock inventories likely to trigger faster moves to replenish stocks in response to recovery in lube demand.
· Blenders and refiners had previously adapted to slowdown in lube demand.
· Firmer consumption in Italy highlights ongoing disparity between state of lube demand in Mediterranean region and in northern European markets like Germany.
· Germany’s October lube demand falls for twenty-eighth month.
· Prolonged fall in demand sustains blenders’ incentive to maintain lower stocks.
· Germany’s October lube demand lags consumption in Spain and Italy combined by the largest amount in more than eight years.
· Trend incentivizes refiners and blenders to target south Europe with more supplies.
· Arbitrage to move Group I cargoes from Asia to Mideast Gulf gets harder to work, adding to closed arb from Europe, ICIS data shows.
· Trend raises prospect of Mideast Gulf buyers seeking Group I supplies from alternative sources or switching to consume more Group II base oils.
