Global base oils demand outlook: Week of 29 July

·        Global crude oil prices hold close to lowest in more than a month at a time of year when fuel demand typically gets a boost during the summer holidays.

·        Weaker gasoil and gasoline premiums to crude could incentivize refiners to trim run-rates, cutting crude oil demand.

·        Weak fuel margins and strong base oils margins incentivize refiners to boost base oils output.

·        Any such expectations, combined with lower crude prices and seasonal lull in demand, could prompt buyers to hold back.

·        Any drop in refinery run-rates to cut fuel output could conversely also impact base oils output.

·        Any subsequent drop in base oils output would coincide with signs of a more limited supply surplus in most key markets so far in Q3 2024.

·        Smaller-than-usual supply surplus for the time of year could incentivize buyers to lock in supplies earlier ahead of seasonal pick-up in consumption at end-Q3.

·        Asia-Pacific base oils demand could stay more muted for longer as buyers hold off in anticipation of lower prices.

·        Gap between FOB Asia and CFR India prices stays narrow, pointing to still-muted demand.

·        Delayed buying could prompt stronger pick-up in demand in a few weeks’ time, with a shorter time period before seasonal pick-up in lube consumption at end-Q3/early Q4 2024.

·        Europe’s base oils demand could differ from typical summer trend over coming weeks as buyers face tighter structural supply and hold lower inventories.

·        Competitive premium-grade prices relative to Group I base oils sustain incentive for blenders to maximise consumption of premium grades.

·        US base oils demand gets support from ongoing moves to build and hold larger stocks at a time when finished lube consumption faces seasonal slowdown.

·        Dynamic brings forward future demand.

·        Dynamic leaves buyers facing growing exposure to risk of change in price or of no change in supply fundamentals over the coming weeks.

·        That concern could prompt marked slowdown in demand once distributors/buyers are comfortable with inventory levels.

·        Latin America’s base oils demand for overseas supplies likely to hold firm amid tight supply-demand balance.

·        Demand for overseas supplies outside US could get additional support from preference to cut exposure to risk of disruption to US supplies.