Global base oils - week of Dec 11: Demand outlook

·        Crude oil prices hold close to lowest since July 2023 amid expectations of weaker supply-demand fundamentals in Q1 2024.

·        Diesel premium to crude oil extends gradual fall to five-month low.

·        High interest rates likely to keep pressure on economic growth in key global markets well into 2024.   

·        Firm base oils prices relative to feedstock/competing fuel prices add to slowdown in base oils demand as buyers hold off in anticipation of price-correction. 

·        Demand already faces seasonal slowdown in requirements.

·        Asia’s base oils demand could face further pressure from expectations of rise in surplus supply.

·        Demand likely to hold firmer once buyers are comfortable that they face less risk of lower prices amid underlying growth in regional lube consumption.

·        Asia’s firm lube demand already supports steadier consumption in key global markets in Q3 2023.

·        Rise in base oils supplies in or moving to China point to either a pick-up in end-user demand or pick-up in stock-building.

·        A pick-up in stock-building could trigger subsequent slowdown in demand unless end-user consumption revives more strongly.

·        Europe’s base oils demand could revive earlier than usual at start of next year amid signs of more limited surplus supply and blenders’ more balanced stocks.

·        Europe’s firm base oils export prices relative to other grades support signs of more limited supply.

·        US base oils demand likely to be mixed.

·        Round of posted price-cuts eased buyers’ concern about exposure to lower prices.

·        Reversion of steep discount of US domestic spot prices to posted prices revives those concerns.

·        Increasingly competitive US export prices support firmer buying interest from Latin America.

·        Increasingly competitive US export prices boost feasibility of clearing surplus cargoes and avoiding major supply-build over coming weeks.

·        Expectations of more limited supply-build could support steadier domestic demand.