Global base oils - week of Feb 19: Demand outlook

·        Crude oil prices stay higher as concern about disruptions to supply counter expectations of slower demand growth this year.

·        Diesel premium to crude oil holds firm even as it eases from early-Feb 2024 levels.

·        Prospect of US interest rates staying higher for longer likely to weigh on economic growth/recovery prospects.

·        Higher borrowing costs sustain incentive for blenders to maintain low stocks.

·        Widening gap between base oils prices in different regions could spur demand for supplies to take advantage of less frequent arbitrage opportunities.

·        Base oils demand in Asia-Pacific could get support from signs of more balanced supply, steady lube demand in southeast Asia and steady-to-firm prices.

·        Chinese demand set to revive after lull in activity so far this month because of lunar new year holidays.

·        Chinese demand was firmer in Jan 2024 amid cautious round of stock-building.

·        Strength of seasonal pick-up in lube demand set to determine speed at which Chinese buyers will need to replenish their stocks. 

·        India’s plentiful base oils supplies could curb demand unless price offers are at competitive levels.

·        Europe’s base oils demand could stay muted as still-wide gap between domestic and export prices raises concern about further downward price pressure.

·        Expectations of sufficient availability add to blenders’ preference to maintain low stocks.

·        Gap widens further between US domestic and export prices, and between US posted prices and US domestic prices.

·        Wide gap could prompt domestic US buyers to hold back in anticipation of lower prices.

·        Any such moves could delay or dampen strength of expected seasonal pick-up in demand over coming weeks.

·        Latin America’s base oils demand could face pressure from slowdown in finished lube demand, rise in regional supply.