Americas/EMEA base oils demand outlook: Week of 29 April

·        US base oils demand could stay more muted as sufficient supplies give domestic buyers the leverage to maintain low stocks.

·        Widening discount of US domestic spot prices to posted prices highlights the lack of any reaction to the recent round of posted-price adjustments.

·        Signs of some downward spot price-pressure could add to buyers’ preference to procure small volumes more frequently to limit exposure to any drop in prices.

·        US export prices remain at steeper-than-usual discounts to prices in markets like Europe and India even after recent price recovery.

·        Still-competitive export prices could support demand from overseas markets.

·        Any extension of recent slowdown in domestic demand in Latin America would add to pressure on US refiners to find more distant alternative outlets for their supplies.

·        Latin America’s lube demand likely to rise in Q2 2024 and Q3 2024 from Q1 2024.

·        Size of increase in demand shows signs of lagging earlier expectations.

·        Smaller rise in demand and prospect of rise in regional base oils supply would curb the region's requirements for additional volumes from the US compared with year-earlier levels.

·        Such a trend would put more pressure on US refiners to cut output or to line up more arbitrage shipments to other regions.

·        Brazil’s March lube demand falls for first time in three months and at steepest pace in eighteen months.

·        Drop in demand erodes key support for consumption in Latin America, where demand in Argentina and Mexico already faced a sustained contraction.

·        Drop in demand raises prospect of curbing further Brazil’s requirements for base oils supplies from US at a time when domestic production has recovered.

·        Uncertainty about country's demand prospects could add to slowdown in base oils requirements as blenders move to limit inventory-build.

·        Brazil’s weaker consumption gets no support from Argentina, whose March lube demand extends fall for eighth time in nine months.

·        Argentina’s lube production falls even faster in March 2024 amid signs that blenders seek to work down and so minimize stocks, cutting their exposure to sliding demand.

·        Falling lube demand and output, and prospect of extension of the trend, cut Argentina’s base oils requirements.

·        Volatility of base oils and lube demand complicates possibility of arbitrage shipments from more distant markets like Asia, boosts attraction of supplies from logistically-closer markets like US.

·        Europe’s demand for premium-grade base oils could get a boost from signs of more plentiful availability and competitive prices vs Group I base oils.

·        Europe’s firm Group I export prices point to stronger demand from overseas markets than from regional markets, especially for brightstock.

·        Italy’s March lube demand falls for first time in ten months on sharp dip in automobile and industrial oil consumption.

·        Slowdown puts onus on other markets to sustain steady-to-firmer lube consumption in regional market.

·        Any extension of slowdown in Italy into Q2 2024 would point to more structural rather than temporary factors impacting demand.

·        Either way, size of slowdown in demand incentivizes blenders to maintain low stocks.

·        France’s February lube demand rises for first time in twenty-one months.

·        France, along with Germany, was one of the key economies whose lube consumption extended its fall throughout 2023.

·        Firmer lube demand in France, if sustained, would help to balance out recent slowdown in Italy’s lube demand and support steadier consumption throughout Europe.

·        Falling lube consumption in markets like France had been a factor that incentivized blenders to maintain low stocks.

·        Signs of steadier-to-firmer lube consumption would increase the need for blenders to boost the size of their low inventories or at least replenish them more frequently.

·        Nigeria’s base oils demand could rise amid signs of a slowdown in shipments to the country in April 2024.

·        Any slowdown would follow steady flows to the West African country in Feb 2024.

·        Global exports to Nigeria hold steady in Feb 2024 as jump in shipments from US cushions signs of slowdown in flows from the Baltic region.