Global base oils - week of June 5: Demand outlook

·        Crude oil prices rise as Saudi Arabia announces further cut to crude oil production. Other OPEC+ members hold off cutting production any further.

·        Crude oil prices surged in early April following OPEC+ move to cut production, before reversing gains on concern of global economic slowdown.

·        That concern gathered pace in recent weeks as slower-than-expected economic growth in China compounds slowdown in Europe and expected slowdown in US.

·        Diesel prices maintain narrower premium to crude oil, reflecting expectations of economic slowdown.

·        Economic slowdown likely to compound seasonal slowdown in lube demand in Q3 2023.

·        Size of recent fall in base oils demand shows signs of outpacing lower lube demand in some markets.

·        Trend suggests blenders are comfortable holding lower inventories to cover lube production requirements.

·        Trend suggests demand will revive after blenders have completed round of destocking.

·        Demand would then likely be steadier as blenders replenish stocks more frequently.

·    Blenders’ strategy assumes easy access to supplies as and when required.