Global base oils - week of Oct 30: Demand outlook

·        Crude oil prices mostly hold in narrower range since mid-Oct 2023 as prospect of slower economic growth balances out geopolitical concerns in Mideast Gulf.

·        Diesel premium to crude continues to edge down, slipping to three-month low.

·        US interest rates expected to hold steady, stay at elevated levels well into next year.

·        Europe’s interest rates likely to start falling before US interest rates in face of flagging growth, lower inflation. 

·        Global base oils market faces prospect of simultaneous seasonal and economic slowdown, combined with drop in demand from Mexico.

·        China’s base oils demand for regional supplies could slow down after rise in country’s September supplies boost stocks, while lube demand stays muted.

·        Asia’s lube demand likely to rise in Q4 2023 and Q1 2024.

·        Trend would absorb more regional base oils supplies and curb surplus flows to other regions.

·        Prospect of more limited arbitrage flows from Asia could support firmer base oils demand in other markets for supplies from other regions.

·        Trend would boost demand in Latin America for base oils supplies from US to produce lubricants.

·        Prospect of smaller-than-expected seasonal slowdown in Latin America’s lube demand over coming months would add to demand for US supplies to produce lubricants.

·        Mexico’s demand for US base oils faces prospect of falling following imposition of stricter rules on oil product and petrochemical imports into the country.

·        Indian buyers could adjust procurement plans if any slowdown in Mexico’s demand for US base oils prompts US sellers to eye other markets instead.

·        Dynamic could give Indian buyers more leverage, balance out impact of lower-than-usual flow of supplies from Asia.  

·        Europe’s base oils demand could fall less steeply over coming months compared with end-2022 as blenders’ low inventories require that they replenish stocks more frequently.

·        European blenders focused on clearing high inventories at end-2022, compounding slowdown in demand at that time.

·        A smaller-than-expected fall in Europe’s demand would partially counter signs of demand weakness in export outlets like Turkey and Egypt.