Global base oils - week of Sep 11: Demand outlook

Global base oils - week of Sep 11: Demand outlook

·        Crude oil prices hold close to highest this year amid expectations supply will tighten more than any slowdown in demand.

·        Crude oil prices likely to hold firm or trend higher as supply tightens over coming months.

·        Diesel prices stay high relative to crude even as they slips from recent highs.

·        Higher fuel prices raise prospect of global interest rates staying higher for longer to curb any pick-up in inflation.

·        Prospect of interest rates staying higher for longer would increase likelihood of or extend slowdown in economic growth in US and Europe and further curb fuel demand.

·        Increasingly weak base oils prices relative to feedstock prices increase likelihood of higher rather than lower prices.

·        Expectations that base oils prices will hold firm or rise curb blenders’ concern about exposure to lower prices, supporting firmer demand.

·        Base oils demand faced pressure in 1H 2023 from weak lube consumption and blenders’ moves to cut stocks.

·        Blenders’ low stocks mean that factor set to have less impact on demand over coming months.

·        China’s slower-than-expected economic recovery adds to pressure on economic growth in rest of Asia.

·        Regional blenders in Asia likely to continue to procure supplies on need-to basis as hedge against weaker-than-expected demand.

·        Germany’s economy faces sustained pressure from sustained slowdown in industrial activity, weak overseas demand and high interest rates.

·        Slowdown in Europe’s largest economy raises prospect of domestic and regional blenders managing carefully any moves to replenish stocks to meet seasonal pick-up in lube demand over coming weeks.

·        US interest rates expected to stay high well into 2024 amid signs of still-firm economic growth.

·        Peak Atlantic hurricane-season period over coming weeks increases risk of base oils supply disruptions, increases incentive for blenders to hold sufficient stocks to cover against any such disruptions.

Global base oils - week of Sep 11: Demand outlook
Global base oils - week of Sep 11: Price outlook - arbitrage

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