Global base oils demand outlook: Week of 23 Sept

·        Global crude oil prices stay low even as they rebound over past week as geopolitical factors provide short-term support.

·        Prices continue to face underlying pressure over the medium term from prospect of rising supply and weak demand.

·        Diesel premium to crude oil stays close to lowest in more than a year, reflecting those weak supply-demand fundamentals.

·        Weak diesel prices contrast with unusually firm base oils prices.

·        Contrasting dynamic between diesel and base oils prices is feasible if base oils supply-demand fundamentals stay strong.

·        Base oils market faces prospect of seasonal slowdown in demand and rise in supply in Q4 2024.

·        That dynamic, combined, with high base oils margins, could speed up slowdown in demand as buyers seek to avoid exposure to any major price adjustment.

·        Asia’s base oils demand could be more muted amid signs that buyers have secured sufficient volumes for now to cover seasonal rise in consumption in markets like India and China.

·        China’s Group I price-strength in recent weeks could reflect pick-up in demand to cover for drop in country’s supply following planned closure of Group I unit in Oct 2024.

·        Europe’s base oils demand could get support from blenders’ low inventories that require more frequent moves to replenish stocks.

·        Underlying lube demand weakness likely to curb any moves to procure additional volumes.

·        US base oils demand could face pressure from weak lube consumption, seasonal slowdown in demand in Q4 2024.

·        Demand could face further pressure from moves to trim inventories amid easing concern about weather-related supply disruptions, even with the prospect of another storm forming and heading towards the US Gulf coast over the coming week.

·        Latin America’s base oils demand could ease as buyers anticipate improvement in supply from US, and prices that reflect that improvement in supply.