Global base oils - week of Nov 27: Demand outlook

·        Crude oil prices mostly hold in lower range as market awaits OPEC+ decision on future production plans.

·        Global economic slowdown seen leaving crude oil demand lagging supply in Q1 2024.

·        Diesel premium to crude oil stays at lower levels vs Q3 2023, stays higher than 1H 2023.

·        Global lube demand readies for sharp seasonal slowdown at year-end before gradual recovery from start of 2024.

·        Lubricant blenders globally face incentive to hold back in response to lower crude oil prices and until they are confident that base oils prices have completed any adjustments.

·        The adjustment could be completed faster than usual as relatively tighter fundamentals support firmer margins in markets like Asia and Europe.  

·        China’s demand shows signs of steadying after sharp slowdown at start of Q4 2023.

·        Blenders’ preference to maintain low stocks in that market leaves them exposed to possibility of tighter supply-demand fundamentals at start of 2024.

·        India’s base oils demand shows signs of holding firm, with little sign of any significant stock-build.

·        Seasonal slowdown in Europe’s base oils demand shows signs of having more muted impact on supply and prices.

·        Trend reflects signs of more limited supply among blenders and refiners.

·        Trend contrasts with surplus base oils supply among blenders and refiners this time last year. 

·        US base oils demand likely to stay muted as round of new posted price cuts begins.

·        Cut in US Group II heavy-grade posted prices leaves their premium to domestic spot prices below the average for the year.

·        Heavy-grade posted price premium to spot prices had been unusually large before the price-cut, incentivizing buyers to hold back to avoid risk of price-correction.

·        Lower posted-price premium could ease those concerns, supporting steadier demand.