Global base oils - week of Oct 16: Demand outlook

·        Crude oil prices likely to hold firm as tight supply, geopolitical tensions counter impact of slowdown in demand.

·        Diesel premium to crude stays rangebound below Q3 2023 highs, still well above typical levels.

·        IEA raises 2023 oil demand growth forecast, cuts 2024 growth forecast amid slower economic growth.

·        US interest rates seen staying high well into next year as inflation stays higher than expected.

·        Prospect of seasonal slowdown in global base oils demand in coming months could have smaller price impact than usual following signs of smaller-than-usual supply build in Q3 2023.

·        Global base oils supply recovers in July but stays lower than usual.

·        Global lube demand shows signs of falling in July, but less than usual, curbing supply-build at start of Q3 2023.

·        Supply would need to extend that trend and stay lower than usual in Q4 2023 to limit supply-build and any downward pressure on prices.

·        Limited plant maintenance work in Q4 2023 means refiners would need to rely on other means to curb supply.

·        Lack of any such moves to curb supply would increase likelihood of supply outpacing demand in coming months.

·        Improvement in base oils margins in recent weeks curbs pressure on refiners to lower supply.

·        Either way, prospect of sufficient supplies over coming months gives blenders the flexibility to maintain low stocks and procure smaller volumes more regularly.

·        Such a strategy would also allow them to benefit from any price-pressure from any build-up of surplus supplies over the coming weeks.