· Crude oil prices extend rise to highest since Q4 2022 in face of growing supply shortfall and signs of steadying economic activity in China.· Diesel prices rise faster than crude oil, lifting diesel crack close to highest since Jan 2023.· US inflation rises in August partly because of higher fuel prices.· Trend highlights dilemma for crude oil producers – higher inflation raises prospect of interest rates staying higher for longer, curbing economic growth.· Low base oils values versus diesel insinuate weak supply-demand fundamentals.· Refiners show signs of adjusting production in response to weak demand fundamentals and low margins during Q3 2023.· Production set to face further pressure from round of plant maintenance work in Asia and Americas over coming months.· Ongoing peak Atlantic hurricane season maintains higher possibility of weather-related disruptions to US supply and demand over coming weeks.· Recent rise in base oils export prices in all the key markets suggest supply is tightening even if outright demand remains weaker than usual.· Extension of current supply, demand and price trends could leave spot buyers with tightening availability and producers with more leverage to target prices that revert to a wider premium to diesel prices.· Prospect of higher prices and signs of more limited supply surplus could spur blenders to bring forward procurement plans, boosting short-term demand.· Blenders face challenge of weighing up such moves with weaker-than-usual outright demand and prospect of seasonal slowdown in consumption during winter months.· Weak demand outlook and high cost of money likely to sustain attraction for blenders to maintain low inventories even if that exposes them to risk of higher prices.· Such moves likely to sustain steadier demand, even if at lower levels.· Such moves would contrast with weaker-than-expected demand in 2H 2022 and 1H 2023. .Global base oils - week of Sep 18: Price outlook - arbitrage
· Crude oil prices extend rise to highest since Q4 2022 in face of growing supply shortfall and signs of steadying economic activity in China.· Diesel prices rise faster than crude oil, lifting diesel crack close to highest since Jan 2023.· US inflation rises in August partly because of higher fuel prices.· Trend highlights dilemma for crude oil producers – higher inflation raises prospect of interest rates staying higher for longer, curbing economic growth.· Low base oils values versus diesel insinuate weak supply-demand fundamentals.· Refiners show signs of adjusting production in response to weak demand fundamentals and low margins during Q3 2023.· Production set to face further pressure from round of plant maintenance work in Asia and Americas over coming months.· Ongoing peak Atlantic hurricane season maintains higher possibility of weather-related disruptions to US supply and demand over coming weeks.· Recent rise in base oils export prices in all the key markets suggest supply is tightening even if outright demand remains weaker than usual.· Extension of current supply, demand and price trends could leave spot buyers with tightening availability and producers with more leverage to target prices that revert to a wider premium to diesel prices.· Prospect of higher prices and signs of more limited supply surplus could spur blenders to bring forward procurement plans, boosting short-term demand.· Blenders face challenge of weighing up such moves with weaker-than-usual outright demand and prospect of seasonal slowdown in consumption during winter months.· Weak demand outlook and high cost of money likely to sustain attraction for blenders to maintain low inventories even if that exposes them to risk of higher prices.· Such moves likely to sustain steadier demand, even if at lower levels.· Such moves would contrast with weaker-than-expected demand in 2H 2022 and 1H 2023. .Global base oils - week of Sep 18: Price outlook - arbitrage