· Crude oil prices stay lower even after recovery in past week, with geopolitical concerns countering pressure from expectations of weaker demand and increasing supply over the coming months.· Diesel premium to crude oil stays relatively low, contrasting with increasingly firm base oil premium to diesel and VGO.· Divergence between crude oil and base oil prices typically triggers adjustment in base oil prices, even if after a time lag.· Lack of any such price adjustment suggests supply-demand fundamentals are at levels that support current base oil prices.· Base oils demand likely to get support from seasonal revival in lube consumption in US, Europe and Asia at end-Q3 2024.· Base oils demand then faces prospect of slowing in Q4 2024.· Slowdown could coincide with rise in surplus supply from US if any weather-related supply disruptions are less severe than feared.· Dynamic incentivizes buyers to maintain lower inventories and to procure smaller volumes more frequently.· Asia’s base oils demand could get support from stock-replenishment moves in the coming weeks, and from arbitrage opportunities in other regions.· Base oils demand within Europe could be more muted as signs of sufficient availability of premium-grade base oils give buyers the option of procuring smaller volumes more regularly.· Sustained strength of Europe Group I prices relative to other grades and other regions points to ongoing underlying demand for the product.· Signs of more Group I supplies staying in or heading to the European market could ease concerns about sufficient availability of those supplies, incentivizing buyers to procure smaller volumes more regularly.· US base oils demand could face sudden sharp slowdown if weather-related supply disruptions are less severe than feared.· Demand had got support in recent months from stock-building to cover against any such supply disruptions.· A reversal of that dynamic would cut demand and add to supply.· Latin America’s base oils demand for overseas supplies likely to hold firm as supply-demand fundamentals stay tight..Global base oils margins outlook: Week of 12 Aug.Global base oils arb outlook: Week of 12 Aug.Asia base oils supply outlook: Week of 12 Aug
· Crude oil prices stay lower even after recovery in past week, with geopolitical concerns countering pressure from expectations of weaker demand and increasing supply over the coming months.· Diesel premium to crude oil stays relatively low, contrasting with increasingly firm base oil premium to diesel and VGO.· Divergence between crude oil and base oil prices typically triggers adjustment in base oil prices, even if after a time lag.· Lack of any such price adjustment suggests supply-demand fundamentals are at levels that support current base oil prices.· Base oils demand likely to get support from seasonal revival in lube consumption in US, Europe and Asia at end-Q3 2024.· Base oils demand then faces prospect of slowing in Q4 2024.· Slowdown could coincide with rise in surplus supply from US if any weather-related supply disruptions are less severe than feared.· Dynamic incentivizes buyers to maintain lower inventories and to procure smaller volumes more frequently.· Asia’s base oils demand could get support from stock-replenishment moves in the coming weeks, and from arbitrage opportunities in other regions.· Base oils demand within Europe could be more muted as signs of sufficient availability of premium-grade base oils give buyers the option of procuring smaller volumes more regularly.· Sustained strength of Europe Group I prices relative to other grades and other regions points to ongoing underlying demand for the product.· Signs of more Group I supplies staying in or heading to the European market could ease concerns about sufficient availability of those supplies, incentivizing buyers to procure smaller volumes more regularly.· US base oils demand could face sudden sharp slowdown if weather-related supply disruptions are less severe than feared.· Demand had got support in recent months from stock-building to cover against any such supply disruptions.· A reversal of that dynamic would cut demand and add to supply.· Latin America’s base oils demand for overseas supplies likely to hold firm as supply-demand fundamentals stay tight..Global base oils margins outlook: Week of 12 Aug.Global base oils arb outlook: Week of 12 Aug.Asia base oils supply outlook: Week of 12 Aug
