Global base oils - week of July 31: Demand outlook

·        Crude oil prices rise to highest in more than three months on expectations that crude oil supply will increasingly lag demand.

·        Diesel premium to crude oil extends rise to highest since January – well below highs of 2022, well above typical levels before 2022.

·        Diesel premium to crude rises amid signs of still-lower-than-usual stocks even amid global economic slowdown.

·        US Fed raises interest rates as expected; even if interest rates have peaked, they are likely to remain at least at current levels well into next year.

·        US currency strengthens vs euro amid expectations further rise in interest rates in US more likely than in Europe, whose economic growth remains anaemic.

·        Stronger US currency typically puts downward pressure on crude oil prices.

·        China’s slower-than-expected economic recovery and weakening services sector raises expectations of stronger stimulus measures.

·        Global lube demand faces seasonal slowdown in third quarter of the year.

·        Slowdown in lube demand shows signs of being shallower than expected.

·        Market faces seasonal pick-up in lube demand from end-Q3 2023, combined with blenders’ moves to replenish depleted stocks.

·        Blenders comfortable that supply will be sufficient to cover requirements to replenish stocks and meet rise in lube demand.

·        Blenders may face lower-than-usual supply-surplus in late Q3 2023, unlike same time last year.

·        Supply could be lower than expected as ongoing arbitrage flows from US in Q3 2023 limit any supply-build.

·        Supply could be lower than expected amid lower-than-expected base oils output in southeast Asia, snug Group I availability in Europe.

·        Supply could stay lower as squeezed margins put growing pressure on refiners to cut or maintain lower output.

·        Base oils demand could get support in coming weeks if blenders deem that supply is tighter than expected.

·        Base oils demand could get support if blenders bring forward procurement plans in anticipation of higher prices.