Global base oils demand outlook: Week of 20 May

·        Crude oil prices rise last week, stay well below March-April 2024 levels amid mixed signals about state of economic growth in US/China and uncertainty about timing of US interest-rate cuts.

·        Diesel premium to crude edges up from lowest since Q2 2023, stays well below levels over most of past year.

·        Global base oils prices hold onto most of their recent gains even after this month’s fall in crude prices and with weaker diesel crack.

·        Firm base oils prices boost prospect of supply outpacing demand.

·        Signs of sufficient base oils supply of most products in most markets give blenders the optionality to maintain low stocks and procure smaller volumes more frequently.

·        Concern about supply outpacing demand and any subsequent price-response adds to blenders’ incentive to maintain lower stocks. 

·        China’s demand for imported cargoes of Group II base oils shows signs of rising after supply tightened in response to closed arbitrage.

·        China’s total base oils demand shows signs of staying muted.

·        India’s base oils demand shows signs of staying lower as buyers resist regional refiners’ higher prices, making arbitrage less feasible.

·        Concern that prices could ease could incentivize India's buyers to work down existing inventories first before seeking additional supplies.

·        Europe’s demand for Group I brightstock could get support from concern about tighter availability of the product because of a larger-than-expected recent drop in supply.

·        Europe’s demand for premium-grade base oils could get support from sufficient supply, even when regional plants undergo maintenance work.

·        Firm US light-grade base oils prices relative to feedstock prices and to other regions point to firmer demand or tighter supply.

·        Firm prices raise prospect of rise in surplus volumes if demand is insufficient to absorb any pick-up in supply.

·        Lack of any marked change in arbitrage opportunities to move overseas supplies to US suggests that its domestic supply remains sufficient to meet demand.