Global base oils - week of Sep 25: Demand outlook

·        Crude oil prices hold steady over past week close to highest since Nov 2022.

·        Crude oil prices likely to extend upward trend as increasingly tight supply outweighs any slowdown in demand.

·        Diesel prices stay unusually high versus crude, reflecting tight middle distillates supply.

·        Russia’s temporary ban on diesel/gasoline exports likely to provide further support to diesel values.

·        Growing number of central banks pause interest-rate increases as inflation continues to ease.

·        Interest rates in US and Europe likely to remain elevated well into next year – keeping squeeze on economic activity.

·        High interest rates incentivize blenders to minimize stocks.

·        Prospect of slower economic growth in major markets likely to compound seasonal slowdown in lube demand in coming months.

·        Lube demand weakness complicates blenders’ moves to raise prices to pass on higher production/feedstock costs.

·        Those difficulties increase importance/attraction of locking in base oils supplies to limit exposure to even higher prices.

·        Weak base oils prices continue to incentivize refiners to minimize base oils output, adding to blenders’ incentive to lock in supplies.

·        Blenders in several regions announce lubricant price increases in response to higher costs.

·        Trend could spur end-users to bring forward procurement plans before price-increases come into effect.

·        Lube demand shows signs of holding firm in Latin America, mixed in other markets.

·        Latin America’s lube demand set to face seasonal slowdown in Q4 from Q3 2023. But consumption likely to stay higher than earlier expectations.

·        US blenders likely to be more comfortable trimming feedstock supplies once peak hurricane season has passed.

·        Asia’s lube demand faces seasonal rise in Q4 consumption vs Q3 2023, and even larger rise in Q1 2024.

·        Seasonal pick-up in China’s lube demand at end-Q3 show signs of being weaker than usual.