· US’ domestic base oils demand likely to get support from buyers’ moves to build larger stocks as insurance against weather-related supply disruptions.· Unusually active start to the Atlantic hurricane season adds to concern about such supply disruptions over the coming months.· Firmer demand would extend seasonal pick-up in domestic consumption at start of Q2 2024..· Domestic demand would typically face slowdown once buyers have completed stock-building, and as market faces seasonal slowdown in consumption around this time of year.· Demand would then need to rely more on export markets to avoid risk of any supply-build.· Overseas demand likely to be more muted following steep rise in US base oils prices relative to prices in overseas markets in recent months.· Active start to Atlantic hurricane season raises uncertainty about extent and speed of any supply-build in US market.· Any smaller-than-expected supply-build, or difficulty with meeting existing requirements in overseas markets, could trigger rise in demand in those markets for supplies from other sources.· US base oils/lube exports continue to account for more than 50% of total demand in April 2024 even with surge in domestic consumption..· Large share highlights importance of export market in maintaining supply-balance in US, and importance of US shipments as source of supplies for those export markets..· Demand from Latin America could be more mixed as high US export prices cut attraction of procuring base oils for other purposes besides lubricants production.· Demand could also get support from buyers seeking to ensure stability of supply for their lubricants production during hurricane season.· Brazil’s demand for overseas base oils supplies likely to hold firm amid signs the country’s firm consumption is keeping surplus supply tight, even with imports staying unusually high..· Any sustained strength in Brazil’s base oils imports requirements would contrast with last year, when domestic plant shutdowns in H2 2023 boosted requirements for overseas supplies.· Any sustained strength in Brazil’s imports would instead reflect more the steady rise in the country’s base oils requirements so far this year..· Argentina’s lube demand falls in May 2024 at its slowest pace in five months..· Any extension of the trend could point to demand starting to bottom out.· Any subsequent improvement in base oils demand could be delayed after Argentina’s lube production exceeds demand in May 2024 by largest volume in four months.· Trend triggers rise in country’s lube stocks to highest this year.· Higher lube stocks could incentivize blenders to curb output over following months as they first work down existing inventories..· Europe’s base oils demand typically starts to slow down in months of July and August.· Trend could differ this year for Group I base oils in view of tighter availability in recent months.· Even so, mixed signals on recovery in region’s lube consumption likely to incentivize blenders to maintain lean inventories.· Group I light-grade base oils price discount to Group II prices shrinks further to narrowest since H2 2022.· Narrower discount and tight Group I supply add to incentive for blenders to use more premium-grade base oils instead.· Signs of healthy availability of Group II/III base oils add to attraction of using more premium-grade base oils.· Persistent strength of Group I prices relative to premium-grade prices points to ongoing underlying demand for Group I base oils.· Italy’s blenders show signs of boosting base oils supplies from other markets amid dwindling domestic Group I supply and more plentiful availability of premium grades.· Italy’s domestic base oils sales fall sharply in first five months of 2024, contrasting with smaller slowdown in total lube consumption, reflecting that dynamic..· Morocco shows signs of taking delivery of more supplies from US in recent weeks, adding to recent pick-up in shipments from US to the North African country.· Nigeria sees pick-up in shipments reaching country since late-June 2024, following signs of sharp slowdown in supplies during previous two months..Asia base oils demand outlook: Week of 8 July.Global base oils margins outlook: Week of 8 July.Global base oils arb outlook: Week of 8 July.Global base oils cargo flows: Week of 8 July
· US’ domestic base oils demand likely to get support from buyers’ moves to build larger stocks as insurance against weather-related supply disruptions.· Unusually active start to the Atlantic hurricane season adds to concern about such supply disruptions over the coming months.· Firmer demand would extend seasonal pick-up in domestic consumption at start of Q2 2024..· Domestic demand would typically face slowdown once buyers have completed stock-building, and as market faces seasonal slowdown in consumption around this time of year.· Demand would then need to rely more on export markets to avoid risk of any supply-build.· Overseas demand likely to be more muted following steep rise in US base oils prices relative to prices in overseas markets in recent months.· Active start to Atlantic hurricane season raises uncertainty about extent and speed of any supply-build in US market.· Any smaller-than-expected supply-build, or difficulty with meeting existing requirements in overseas markets, could trigger rise in demand in those markets for supplies from other sources.· US base oils/lube exports continue to account for more than 50% of total demand in April 2024 even with surge in domestic consumption..· Large share highlights importance of export market in maintaining supply-balance in US, and importance of US shipments as source of supplies for those export markets..· Demand from Latin America could be more mixed as high US export prices cut attraction of procuring base oils for other purposes besides lubricants production.· Demand could also get support from buyers seeking to ensure stability of supply for their lubricants production during hurricane season.· Brazil’s demand for overseas base oils supplies likely to hold firm amid signs the country’s firm consumption is keeping surplus supply tight, even with imports staying unusually high..· Any sustained strength in Brazil’s base oils imports requirements would contrast with last year, when domestic plant shutdowns in H2 2023 boosted requirements for overseas supplies.· Any sustained strength in Brazil’s imports would instead reflect more the steady rise in the country’s base oils requirements so far this year..· Argentina’s lube demand falls in May 2024 at its slowest pace in five months..· Any extension of the trend could point to demand starting to bottom out.· Any subsequent improvement in base oils demand could be delayed after Argentina’s lube production exceeds demand in May 2024 by largest volume in four months.· Trend triggers rise in country’s lube stocks to highest this year.· Higher lube stocks could incentivize blenders to curb output over following months as they first work down existing inventories..· Europe’s base oils demand typically starts to slow down in months of July and August.· Trend could differ this year for Group I base oils in view of tighter availability in recent months.· Even so, mixed signals on recovery in region’s lube consumption likely to incentivize blenders to maintain lean inventories.· Group I light-grade base oils price discount to Group II prices shrinks further to narrowest since H2 2022.· Narrower discount and tight Group I supply add to incentive for blenders to use more premium-grade base oils instead.· Signs of healthy availability of Group II/III base oils add to attraction of using more premium-grade base oils.· Persistent strength of Group I prices relative to premium-grade prices points to ongoing underlying demand for Group I base oils.· Italy’s blenders show signs of boosting base oils supplies from other markets amid dwindling domestic Group I supply and more plentiful availability of premium grades.· Italy’s domestic base oils sales fall sharply in first five months of 2024, contrasting with smaller slowdown in total lube consumption, reflecting that dynamic..· Morocco shows signs of taking delivery of more supplies from US in recent weeks, adding to recent pick-up in shipments from US to the North African country.· Nigeria sees pick-up in shipments reaching country since late-June 2024, following signs of sharp slowdown in supplies during previous two months..Asia base oils demand outlook: Week of 8 July.Global base oils margins outlook: Week of 8 July.Global base oils arb outlook: Week of 8 July.Global base oils cargo flows: Week of 8 July
