Global base oils - week of Dec 18: Demand outlook

·        Crude oil prices rebound from recent lows amid expectations of earlier fall in interest rates in 2024 and prospect of weaker US dollar versus other currencies.

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

·        Global base oils demand faces seasonal slowdown, wariness about price-correction amid firm margins, lower feedstock prices.

·        Blenders’ strategy of maintaining low stocks is likely to trigger more frequent moves to replenish inventories in markets where underlying lube demand remains firm, such as Latin America and Asia.

·        China’s base oils demand shows signs of getting support more from stock-replenishment than from any strong pick-up in lube consumption.

·        India’s base oils demand likely to hold steady even as buyers target lower prices in anticipation of healthy availability.

·        Europe’s high base oils values vs feedstock prices and vs other regions point either to firm supply-demand fundamentals or to mismatch that could trigger growing supply-build.

·        Seasonal slowdown in US base oils demand gives buyers time to hold back and limit their exposure to repercussions of any supply-build over the coming weeks.

·        US domestic demand could face more downward pressure as wide posted-price premium to spot prices adds to incentivize for buyers to hold back.

·        Buyers’ lower stocks, and any signs of more muted supply-build, could trigger earlier pick-up in demand.

·        Americas base oils demand could get support from competitive US export prices, steady underlying lube demand in Latin America.

·        Latin America’s firm lube demand likely to be insufficient to counter slowdown in Mexico’s base oils consumption.

·        Lube demand in key global markets rises in Sept 2023 year on year and from Aug 2023.

·        Firmer demand contrasts with drop in base oils supply in Sept 2023.

·        Diverging supply-demand trends help to leave global market more balanced at start of Q4 2023.