Global base oils - week of July 24: Demand outlook

·        Crude oil prices extend rise, show signs of new ‘bottom’ around $78/bl, which had previously been top of $72-78/bl range in May-June.

·        Crude oil prices get support from weaker US dollar and expectations that US interest rates are close to peaking following likely further rise in rates this week.

·        US interest rates expected to remain at elevated levels at least through rest of this year even if rate-increases pause.

·        Europe’s central bank expected to raise interest rates this week. Easing inflation concerns similarly raise expectations that rates are close to peaking.

·        Lower-than-expected UK inflation in June adds to same dynamic.

·        Unexpectedly weak Chinese economic growth in recent months triggers additional stimulus measures, with more expected.

·        Global base oils surplus in 2023 reflects more the weakness of lube demand, with supply holding similar to year-earlier levels in first four months of year.

·        Trend suggests firmer lube and base oils demand would generate a price response if supply stays steady.

·        Base oils demand likely to be firmer in coming weeks even if lube demand stays weaker than usual as blenders replenish lower stocks more frequently and prepare for seasonal pick-up in demand at end-Q3 2023.