Americas/EMEA base oils - week of Oct 9: Demand outlook

·        Americas base oils demand could ease in coming weeks amid seasonal slowdown in demand in US and Latin America.

·        US four-week average gasoline demand falls at end-September for first time in more than a month, and at fastest pace since end-2022.

·        US domestic base oils demand likely to slow in coming weeks as prospect of steady-to-lower prices adds to seasonal slowdown in consumption.  

·        US’ July base oils/lube demand rises for second time in three months on firmer domestic consumption, high exports.

·        Trend highlights importance of higher-than-usual exports to cushion impact of slower domestic demand this year.

·        Trend highlights importance of base oils prices that sustain higher-than-usual exports and that deter arbitrage shipments from other markets.

·        US’ domestic demand holds in narrower range in three months to July, contrasting with more volatile swings in demand in preceding months.

·        Trend could point to stabilization of domestic demand, even if at lower levels.

·        US base oils exports show signs of recovering in September, after sharp slowdown in August, amid pick-up in flows to Europe and Latin America.

·        Overseas demand will need to hold firm to balance out likely slowdown in domestic US demand over coming months.

·        Mexico’s demand for US supplies of very-light grade base oils could slow after rebound in US base oils prices versus heating oil since late-Sep 2023.

·        Brazil’s August base oils imports rise to ten-month high, adding to surge in shipments to the country ahead of scheduled plant maintenance work.

·        Rise in Brazil's demand for overseas supplies provides US refiners with valuable outlet during Q3 2023, curbing supply-build in their market.

·        Rise in demand for overseas supplies likely to ease in Q4 2023 following build-up of stocks to cover for domestic plant maintenance work.

·        A reversion of base oil imports to more typical levels would leave US refiners facing prospect of moving more supplies to other overseas outlets to limit any year-end supply-build.  

·        Europe’s base oils demand likely to stay muted amid expectations of sufficient supply.

·        Sufficient supply would give blenders leverage to maintain lower stocks as end-user demand starts to face seasonal slowdown.

·        Rising base oils margins likely to dampen upward base oils price-pressure, adding to lack of urgency for blenders to secure more supplies.

·        Germany’s July lube demand falls for twenty-fifth straight month.

·        Sustained drop in demand highlights disparity in demand between different regions in Europe.

·        Drop in demand highlights weakness of domestic consumption of certain lubricants like hydraulic oils and metalworking fluids.

·        Weaker demand contrasts with surging exports of hydraulic oils and smaller slowdown in exports of metalworking fluids.

·        Trend points to firmer industrial oils demand in other markets compared with Germany.

·        Germany’s lube production falls more steeply than lube imports in July and in first seven months of 2023.

·        Trend points to lower domestic demand for base oils feedstock supplies, and more muted drop in demand for feedstock supplies from blenders moving lube supplies to Germany.

·        Trend points to more caution among domestic blenders than among blenders exporting lubricants to Germany.

·        Europe’s July base oils exports to non-EU markets fall for fourth time in five months.

·        Trend reflects Europe’s limited Group I supply surplus, incentivizes overseas buyers to line up alternative supply sources or to use more premium-grade base oils.

·        Extended slowdown in Europe’s base oils exports raises prospect of overseas buyers lining up more permanent alternative supply sources.

·        That trend shows signs of materializing amid pick-up in flows from less regular sources like Turkey and Algeria.

·        Premium-grade base oils exports from Spain rebound in September, countering signs of lower volumes from Mideast Gulf to Europe.

·        Europe’s Group III base oils prices for supplies with limited or no approvals face more pressure than prices for supplies with approvals, ICIS data shows.

·        Trend points to firmer demand for supplies with approvals, even as supplies from Spain rise strongly.

·        Asia’s August base oils exports to Mideast Gulf stay unusually high amid growing number of increasingly regular sources such as Thailand, Taiwan and China.

·        Surge in exports from Asia to Mideast Gulf coincides with steady flows from Europe  – mostly because of arbitrage supplies earlier in the year.

·        Trend triggers sustained rise in global exports to Mideast Gulf this year.

·        Trend shows signs of extending at least through Q4 2023.