Global base oils - week of Aug 28: Demand outlook

·        Crude oil prices consolidate in narrower range amid uncertainty about extend of global economic weakness and crude oil supply tightness.

·        China’s slowing economic growth likely to impact other markets, especially in Asia.

·        Prospect of US interest rates rising further or staying higher for longer set to weigh on US economic growth.

·        Crude oil supply tightness could be smaller than expected amid signs of rising supplies from other sources.

·        Diesel prices extend rise versus crude oil to highest since start of 2023 on concern about tight supply heading into winter months.

·        Lube demand faces seasonal rise in US, Europe and Asia, slowdown in Latin America in coming months.

·        Blenders’ procurement strategy points to expectations of sufficient base oils supply to meet seasonal pick-up in demand.

·        Blenders likely to be wary of building much higher stocks in coming weeks as they then prepare to trim inventories before year-end.

·        Trend adds to attraction of procuring smaller base oils volumes more regularly, and assumption of sufficient supply to meet such procurement plans.

·        Buyers likely to have access to sufficient supply assuming no unexpected refinery production issues over coming weeks.

·        US enters peak period of Atlantic hurricane season; one storm forecast to head towards Florida west coast later this week.

·        Buyers less likely to see swathe of surplus supply as refiners avoid any major supply-build during Q3 2023.

·        Prospect of firmer demand and sufficient supply likely to support firm base oils prices, curb concern of risk of lower prices.

·        Weakness of light-grade base oils prices relative to diesel prices could trigger drop in supply and subsequent rise in demand in anticipation of such a development.

·        Surplus of global base oils supply over demand stays larger than usual in May, highlighting the pressure that refiners face to avoid a supply-build amid slower-than-usual demand.