Global base oils demand outlook: Week of 29 April

·        Crude oil prices hold well above Nov 2023-March 2024 levels, down from recent highs in April 2024 as prospect of interest rates staying higher for longer counters concern about tighter supply.

·        Diesel premium to crude oil extends fall to lowest in almost a year.

·        Unusually high diesel cracks in recent years had been a factor supporting base oils prices that faced pressure to keep pace or see refiners redirect more feedstock to diesel production.

·        Lower diesel cracks raise prospect of reversing that trend.

·        Prospect of sufficient base oils supply gives buyers the leverage to maintain lower inventories, curbing size of boost from seasonal rise in demand in markets like US and Europe.

·        Asia’s base oils demand could turn more cautious as firm FOB Asia base oils prices outpace domestic/CFR prices in China and India, pointing to disconnect between supply and demand expectations.

·        Europe’s demand for premium-grade base oils could get support from signs of more plentiful supply and competitive prices vs Group I base oils.

·        Lack of major response in US domestic spot prices to recent rise in refiners’ posted prices points to signs that posted-price adjustments have less impact on immediate demand than they did previously.

·        Lack of major response in domestic spot prices suggests that buyers are confident that supply remains sufficient to prevent a significant change in spot prices.

·        Trend incentivizes buyers to maintain procurement strategy of buying smaller volumes on a more regular basis.

·        Overseas demand for US supplies could get support from prices that remain competitive even after their recent rise.