Global base oils - week of Nov 20: Demand outlook

·        Crude oil prices likely to get growing support at current, lower levels, amid expectations that some producers will extend supply cuts, countering prospect of weaker demand.

·        Crude oil prices could get further support from US moves to replenish its emergency stocks.

·        Diesel premium to crude oil continues to trend lower, even if still well above 1H 2023 levels.

·        Lower crude/feedstock prices incentivize buyers to hold back until they are comfortable that base oils prices have completed any price-adjustment.

·        Crude prices need to show signs of steadying or rising before base oils prices complete any adjustments.

·        Asia’s more balanced supply-demand fundamentals could limit size of any such price adjustment, supporting steadier demand.

·        China’s base oils demand shows mixed signals.

·        Its recent drop in flows to Singapore, rise in domestic supply and relatively steady prices could be response to firmer demand.

·        India’s demand shows signs of holding firm for key base oils grades, falling for very-light grade base oils.

·        Europe’s base oils demand faces seasonal slowdown over coming weeks.

·        Region’s supply-demand dynamics show signs of staying relatively balanced, limiting surplus volumes for export market.

·        Downward pressure on regional demand likely to be more muted than Q4 2022, when lube demand was falling sharply and buyers sought to cut high inventories.

·        US base oils demand could face sharper slowdown than other regions amid prospect of more plentiful surplus availability and after buyers brought forward their Q4 procurement plans.

·        US base oils demand could get support from domestic and regional buyers’ more limited alternative supply options as arbitrage shipments to Americas get harder to work.

·        Brazil’s demand for overseas supplies could ease from early next year, from unusually high levels in recent months.

·        Any slowdown in demand would follow completion of plant maintenance work during 2H 2023.

·        Slowdown could add to more muted requirements in Latin America amid easing lube consumption.