Global base oils demand outlook: Week of 19 Aug

·        Global crude oil prices stay under pressure, face more bearish supply-demand fundamentals over the coming months, with geopolitical concerns the key factor providing support.

·        Gasoil premium to crude oil slips close to lowest in more than a year.

·        Weaker diesel values and firm base oils values relative to feedstock prices add to incentive for refiners to maximise base oils output even at a time when demand faced a seasonal slowdown.

·        High base oils margins either point to unusually firm supply-demand fundamentals or to prospect of a supply-build that outpaces demand in the coming months.

·        Asia’s base oils demand likely to get support from stock-replenishment ahead of seasonal pick-up in demand in late-Q3 2024.

·        Signs of relatively balanced supply-demand fundamentals, and steadier-than-usual prices for the time of year, remove obstacles that would deter buyers from locking in supplies.

·        Europe’s base oils demand could stay more muted ahead of seasonal pick-up in requirements after the summer lull.

·        Weak finished lube demand and signs of healthy availability of supply give blenders the leverage to maintain lower stocks and procure smaller volumes more regularly.

·        US base oils demand set to remain supported over the coming weeks until the peak hurricane-period has passed, followed by seasonal slowdown from start of Q4 2024.

·        Latin America’s base oils demand for overseas supplies likely to hold firm for now as fundamentals stay tight.

·        Latin America’s demand could ease in a few weeks if any US supply-disruptions are relatively limited and if arbitrage shipments supplement regular flows.

·        Scenario would raise expectations of pick-up in supply and of price adjustments that reflect that improvement.

·        Those expectations could incentivize buyers to hold off in response.