· Crude oil prices hold in narrow range for more than a month as prospect of weaker demand and sufficient supply counter concerns about Red Sea-related supply disruptions.· Diesel premium to crude oil steadies in narrow range for past month, holds close to lowest since July 2023.· Base oils market mirrors similar trend of muted demand and plentiful supply..· Global base oils demand lags base oils output in 2023 even as supply falls..· Trend likely to continue in 2024 even if demand steadies or improves from year-earlier levels as global base oils production capacity continues to rise.· Trend likely to keep pressure on base oils values versus feedstock/competing fuel prices.· Those base oils values already fell sharply in 2023 from 2022.· Trend gives buyers more flexibility over inventory levels and source of supplies.· Factors such as blenders’ stock levels, different pace of recovery in different regions and plant maintenance could generate pockets of base oils supply-demand imbalance over coming months.· Geopolitical factors could add to pockets of imbalance amid prospect of growing delays for shipments that typically move via Panama Canal and Suez Canal.· Possibility of shipment delays could incentivize distributors/blenders to build larger stocks as cushion against supply disruptions..· Asia’s base oils demand likely to be mixed as blenders weigh up seasonal slowdown at end-2023/start of 2024 with expected rebound in consumption later in Q1 2024.· Blenders also face challenge of weighing up logistical impact of lunar new year holidays in Feb 2024, when activity typically slows.· Lube demand typically rises sharply soon after the lunar new year holidays.· China’s firm base oils values point to steady-to-firm demand.· India’s demand could get a boost from concern about disruptions or delays with delivery of some supplies.· Any such delays would come ahead of seasonal peak in demand at end-Q1 2024.· Europe’s base oils demand could slow down in the near term as buyers wait for prices to stabilize.· Surge in Europe’s domestic base oil price premium to export prices adds to buyers’ incentive to hold off.· Wider premium raises prospect of lower domestic base oils prices or higher export prices to narrow the premium.· Any pull-back in buying in near term could trigger stronger pick-up in demand later in Q1 2024 if buyers ended 2023 with lower-than-usual stocks.· US base oils demand could stay more muted amid concern about downward price pressure.· US domestic base oils prices maintain steep premium to export prices; posted prices maintain steep premium to domestic spot prices.· Steep premium raises prospect of a price adjustment, incentivizing blenders to hold off until any such adjustment is completed.· Americas base oils demand could be mixed, with lower total requirements, but firm demand for US supplies for any such requirements..Global base oils - week of Jan 15: Price outlook - margins.Global base oils - week of Jan 15: Price outlook - arbitrage
· Crude oil prices hold in narrow range for more than a month as prospect of weaker demand and sufficient supply counter concerns about Red Sea-related supply disruptions.· Diesel premium to crude oil steadies in narrow range for past month, holds close to lowest since July 2023.· Base oils market mirrors similar trend of muted demand and plentiful supply..· Global base oils demand lags base oils output in 2023 even as supply falls..· Trend likely to continue in 2024 even if demand steadies or improves from year-earlier levels as global base oils production capacity continues to rise.· Trend likely to keep pressure on base oils values versus feedstock/competing fuel prices.· Those base oils values already fell sharply in 2023 from 2022.· Trend gives buyers more flexibility over inventory levels and source of supplies.· Factors such as blenders’ stock levels, different pace of recovery in different regions and plant maintenance could generate pockets of base oils supply-demand imbalance over coming months.· Geopolitical factors could add to pockets of imbalance amid prospect of growing delays for shipments that typically move via Panama Canal and Suez Canal.· Possibility of shipment delays could incentivize distributors/blenders to build larger stocks as cushion against supply disruptions..· Asia’s base oils demand likely to be mixed as blenders weigh up seasonal slowdown at end-2023/start of 2024 with expected rebound in consumption later in Q1 2024.· Blenders also face challenge of weighing up logistical impact of lunar new year holidays in Feb 2024, when activity typically slows.· Lube demand typically rises sharply soon after the lunar new year holidays.· China’s firm base oils values point to steady-to-firm demand.· India’s demand could get a boost from concern about disruptions or delays with delivery of some supplies.· Any such delays would come ahead of seasonal peak in demand at end-Q1 2024.· Europe’s base oils demand could slow down in the near term as buyers wait for prices to stabilize.· Surge in Europe’s domestic base oil price premium to export prices adds to buyers’ incentive to hold off.· Wider premium raises prospect of lower domestic base oils prices or higher export prices to narrow the premium.· Any pull-back in buying in near term could trigger stronger pick-up in demand later in Q1 2024 if buyers ended 2023 with lower-than-usual stocks.· US base oils demand could stay more muted amid concern about downward price pressure.· US domestic base oils prices maintain steep premium to export prices; posted prices maintain steep premium to domestic spot prices.· Steep premium raises prospect of a price adjustment, incentivizing blenders to hold off until any such adjustment is completed.· Americas base oils demand could be mixed, with lower total requirements, but firm demand for US supplies for any such requirements..Global base oils - week of Jan 15: Price outlook - margins.Global base oils - week of Jan 15: Price outlook - arbitrage