· US base oils demand could be weaker than usual in month of September as buyers focus first on working down existing stocks.· Sliding crude oil prices and drop in US refiners’ base oils posted prices add to attraction for blenders to hold back.· Demand could get support in Q4 2024 if market enters final months of year with lower stocks.· Stocks could fall if market faces any weather-related supply disruptions over coming weeks, after unusually quiet period during Atlantic hurricane season in recent weeks.· A major storm is forecast to make landfall along US Gulf coast later this week.· Weak domestic demand adds to importance of base oils exports staying at elevated levels to limit any supply-build.· Exports already account for more than 85% of US base oils output in June 2024..· Exports’ share stays high in June 2024 even as high US prices cut arbitrage opportunities.· High export volumes, and ongoing flows to other markets like India and West Africa so far in Q3 2024 suggest some US prices could be at levels that support buying interest in those markets.· Any need for any further pick-up in US export volumes could put pressure on adjustment in more US prices to boost overseas buying interest and to close arbitrage from Asia to Latin America. · Current US Group II prices could limit any such pick-up in overseas demand..· Sustained slide in US Group III base oils price premium to Group II base oils prices boosts incentive for blenders to consume more Group III base oils in place of Group II.· Sliding premium also incentivizes refiners to boost Group II output in place of Group III.· Any such rise in Group III base oils demand and Group II supply could prompt prices to reflect that change. · Any such rise in Group III demand and Group II supply could add to importance of high export volumes to limit a supply-build.· Latin America’s base oils demand could turn more cautious amid expectations of improving availability of supply from US and ahead of seasonal slowdown in regional lube consumption in Q4..· Europe’s base oils demand could be more muted than usual for the time of year amid signs of sufficient supply.· High base oils margins also raise concern about exposure to sellers’ price adjustments.· Any need to replenish stocks after summer lull would be against backdrop of still-weak lube demand.· Weak demand extends attraction for blenders to maintain lower inventories and to procure smaller volumes more frequently.· Blenders’ lower stocks could in turn magnify impact of seasonal pick-up in requirements at end-Q3.· France’s lube demand falls in June 2024 for third time in four months and by 2% in H1 2024 from year-earlier levels..· Shrinking demand in one of Europe’s largest lube markets adds to signs of ongoing contraction throughout the region.· Ongoing contraction incentivizes and gives blenders the leverage to maintain low lube and feedstock inventories.· Dynamic pushes onus onto base oils distributors to maintain sufficient stocks to meet more frequent requirements for smaller volumes.· Europe’s shrinking lube demand could also trim the size of the seasonal rise in consumption in month of September from August..· Europe’s Group III base oils price rises relative to Group I and Group II prices after mostly sliding since mid-2023..· Sliding premium since mid-2023 cuts sharply Group III premium to Group I/II prices, boosting attraction of consuming more Group III base oils.· Group III premium to Group I/II base oils stays unusually low even after recent recovery..Asia base oils demand outlook: Week of 9 Sept.Global base oils arb outlook: Week of 9 Sept.Global base oils margins outlook: Week of 9 Sept.US’ June base oils/lube demand rises
· US base oils demand could be weaker than usual in month of September as buyers focus first on working down existing stocks.· Sliding crude oil prices and drop in US refiners’ base oils posted prices add to attraction for blenders to hold back.· Demand could get support in Q4 2024 if market enters final months of year with lower stocks.· Stocks could fall if market faces any weather-related supply disruptions over coming weeks, after unusually quiet period during Atlantic hurricane season in recent weeks.· A major storm is forecast to make landfall along US Gulf coast later this week.· Weak domestic demand adds to importance of base oils exports staying at elevated levels to limit any supply-build.· Exports already account for more than 85% of US base oils output in June 2024..· Exports’ share stays high in June 2024 even as high US prices cut arbitrage opportunities.· High export volumes, and ongoing flows to other markets like India and West Africa so far in Q3 2024 suggest some US prices could be at levels that support buying interest in those markets.· Any need for any further pick-up in US export volumes could put pressure on adjustment in more US prices to boost overseas buying interest and to close arbitrage from Asia to Latin America. · Current US Group II prices could limit any such pick-up in overseas demand..· Sustained slide in US Group III base oils price premium to Group II base oils prices boosts incentive for blenders to consume more Group III base oils in place of Group II.· Sliding premium also incentivizes refiners to boost Group II output in place of Group III.· Any such rise in Group III base oils demand and Group II supply could prompt prices to reflect that change. · Any such rise in Group III demand and Group II supply could add to importance of high export volumes to limit a supply-build.· Latin America’s base oils demand could turn more cautious amid expectations of improving availability of supply from US and ahead of seasonal slowdown in regional lube consumption in Q4..· Europe’s base oils demand could be more muted than usual for the time of year amid signs of sufficient supply.· High base oils margins also raise concern about exposure to sellers’ price adjustments.· Any need to replenish stocks after summer lull would be against backdrop of still-weak lube demand.· Weak demand extends attraction for blenders to maintain lower inventories and to procure smaller volumes more frequently.· Blenders’ lower stocks could in turn magnify impact of seasonal pick-up in requirements at end-Q3.· France’s lube demand falls in June 2024 for third time in four months and by 2% in H1 2024 from year-earlier levels..· Shrinking demand in one of Europe’s largest lube markets adds to signs of ongoing contraction throughout the region.· Ongoing contraction incentivizes and gives blenders the leverage to maintain low lube and feedstock inventories.· Dynamic pushes onus onto base oils distributors to maintain sufficient stocks to meet more frequent requirements for smaller volumes.· Europe’s shrinking lube demand could also trim the size of the seasonal rise in consumption in month of September from August..· Europe’s Group III base oils price rises relative to Group I and Group II prices after mostly sliding since mid-2023..· Sliding premium since mid-2023 cuts sharply Group III premium to Group I/II prices, boosting attraction of consuming more Group III base oils.· Group III premium to Group I/II base oils stays unusually low even after recent recovery..Asia base oils demand outlook: Week of 9 Sept.Global base oils arb outlook: Week of 9 Sept.Global base oils margins outlook: Week of 9 Sept.US’ June base oils/lube demand rises
