Global base oils - week of Feb 5: Demand outlook

·        Crude oil prices reverse all their gains from 2H Jan 2024, revert to more typical range since early Dec 2023.

·        Fall in crude oil prices adds to base oil buyers’ preference to hold back even if crude prices rise.

·        Diesel prices fall more slowly, boosting their premium to crude oil to three-month high.

·        Higher diesel premium to crude oil incentivizes refiners to produce more middle distillates.

·        Global base oils demand set to rise in coming weeks to meet seasonal rise in lube consumption.

·        Lower crude oil prices and expectations of sufficient supplies curb buyers’ urgency to build larger stocks.

·        Buyers’ preference to limit procurement keeps pressure on prices, prompts refiners to clear surplus volumes.

·        Trend could leave refiners with smaller surplus to meet any rise in demand when seasonal pick-up in consumption materializes.

·        Asia’s base oils demand gets support from prospect of seasonal rise in lube demand, tighter supply and expectations that prices are likely to hold firm or rise.

·        China’s base oils demand set to slow down over coming weeks during lunar new year holidays.

·        India’s base oils demand could get support from concern about tighter supplies from Mideast Gulf and more limited Group I availability in Asia.

·        Europe’s base oils market faces prospect of seasonal rise in lube demand in coming months.

·        Blenders’ urgency to replenish stocks is more muted than in Asia amid expectations of sufficient supply.

·        Expectations of sufficient supply give blenders the leverage to maintain lower inventories.

·        Blenders’ lower inventories mean they need to replenish those inventories more frequently.

·        Demand for Europe’s surplus supplies of Group I base oils could get support amid tighter availability in Asia.

·        Domestic US base oils demand could stay more muted amid expectations of healthy availability and as prices hold firm.

·        US domestic spot price discount to posted prices stays unusually wide.

·        Wide price-gap could incentivize blenders to procure sufficient volumes to cover immediate requirements rather than to build larger inventories ahead of the spring oil-change season.

·        Latin Americas’ base oils demand faces pressure from slowdown in finished lube consumption.

·        Demand for US supplies could get support from a lack of alternative supply options from other regions.