Global base oils - week of June 26: Demand outlook

·        Crude oil prices fall to low end of narrow $72-77/bl range over most of past three months on persistent concerns of economic slowdown, combined with signs of higher-than-expected crude oil supply.

·        Prospect of higher interest rates, and interest rates staying higher for longer in US and Eurozone, add to expectations of more prolonged slowdown in economic growth.

·        UK’s larger-than-expected rise in interest rates amid higher-than-expected inflation add to prospect of steeper economic slowdown. 

·        Europe’s June PMI falls, especially for manufacturing, raising expectations of extended slowdown in economic activity.

·        China’s stimulus measures deemed insufficient so far to reverse weaker-than-expected economic recovery.

·        Global lube demand falls by around 1mn t in Q1 2023 vs year-earlier levels, complicating refiners’ ability to clear surplus base oils volumes and cushioning the impact of plant maintenance work in Q2 2023.

·        Sustained slowdown in global lube demand likely extends through Q2 and Q3 2023.

·        Blenders’ moves to hold lower inventories compounds impact of seasonal and economic factors driving down demand.

·        Completion of inventory adjustments likely to curb impact of that factor putting pressure on lube demand.