Global base oils demand outlook: Week of Feb 26

·        Crude oil prices fall, returning closer to mid-point of $77-83/bl range that prices have held in since mid-Dec 2023.

·        Crude oil prices face support from possibility of supply disruptions, pressure from signs that fall in US interest rates will be later than previously expected.

·        Diesel premium to crude oil prices reverts to level it has held around for last four months, after spiking in early Feb 2024.

·        Global base oils demand typically starts to get a seasonal boost around this time of year.

·        Expectations of plentiful base oils supply or weaker-than-usual demand could incentivize blenders to maintain lower-than-usual inventories.

·        Asia’s base oils demand likely to get support from pick-up in activity in China after lunar new year holidays.

·        China’s base oils demand shows signs of holding firm, and market staying relatively balanced.

·        India’s base oils demand could remain more muted unless prices are at competitive levels.

·        Europe’s demand shows signs of staying muted, with buyers comfortable to maintain low stocks.

·        Rise in US posted prices often triggers pick-up in demand as buyers move to lock in more supplies before higher prices come into effect.

·        US buyers face prospect of deciding whether last week’s posted-price announcement by several refiners were outliers or were a precursor to additional announcements by other refiners.

·        Basis for last week’s posted price announcements could reflect specific refiners’ situation.

·        Timing of posted price announcement coincides with typical start of seasonal pick-up in demand.

·        Overseas buyers of US supplies could face incentive to lock in supplies now to cover against possibility of higher prices or tighter supply.

·        Any signs of more US refiners announcing plans to raise posted prices could add to that incentive.

·        Any lack of moves by other refiners to raise posted prices would curb any such incentive.

·        Weak domestic demand in US at end-2023 contrasted with firmer consumption in Asia and signs of stabilising consumption in Europe.

·        Mixed demand coincided with lower base oils supply in Asia and Europe and signs of steady supply in Americas market.

·        Larger disconnect between supply and demand triggered surge in exports from US at end-2023.

·        Ongoing wave of US arbitrage shipments point to extension of that disconnect into first few months of this year.