Global base oils - week of Jan 29: Demand outlook

·        Crude oil prices rise to highest since early Nov 2023 amid growing concern about supply disruptions in Mideast Gulf.

·        Diesel premium to crude oil climbs to highest since Q3 2023 as concern rises about disruption to Europe's diesel supply.

·        Rising crude and diesel prices coincide with prospect of seasonal rise in lube consumption later in Q1 2024.

·        Firmer lube fundamentals and higher crude/diesel prices likely to support firmer base oils demand and ease concern about further drop in base oils prices.

·        Asia base oils demand likely to get support from seasonal rise in lube demand.

·        Asia’s base oils demand could get a further boost from signs of tighter-than-expected regional supply and steady-to-firm prices.

·        China’s base oils demand could ease over coming weeks as activity slows during lunar new year holidays.

·        Extent of pick-up in China’s domestic demand after lunar new year holidays depends on strength of seasonal rise in lube consumption in late Q1 2024.

·        India’s base oils demand could rise as rebounding diesel prices raise prospect of higher price offers for very-light grade base oils.

·        Prospect of disruptions or delays to cargoes from Mideast Gulf/Europe to India could boost demand for supplies from Asia.

·        Europe’s base oils demand likely to rise more strongly in coming weeks than it did this time last year, reflecting blenders’ lower inventories compared with early 2023.

·        Demand likely to revive once buyers are comfortable that the recent price correction is over.

·        Sliding base oils values versus feedstock/diesel prices could support such expectations.

·        Demand in Africa and Mideast Gulf could get support from moves to replenish stocks after slowdown in shipments to those markets in Q4 2023.

·        US base oils demand could improve amid expectations that prices face less downward pressure.

·        Any narrowing of the gap between US domestic and export prices, or domestic spot and posted prices, could add to expectations of steadier-to-firm prices and curb buyers’ incentive to hold back.

·        Base oils demand in Latin America could face pressure from signs of weaker lube demand growth in the region.

·        Demand could hold steady-to-firm for US supplies amid competitive prices and tighter supply in other regions.