Global base oils - week of Nov 6: Demand outlook

·        Crude oil prices mostly hold in a $85-95/bl range since 2H Aug 2023 as prospect of global economic slowdown balances out geopolitical concerns.

·        Diesel premium to crude oil steadies, down from highs at end-Sep 2023, still well above typical levels.

·        Prospect of elevated interest rates well into next year in US/Europe expected to weigh on global economic activity.

·        Prospect of high interest rates and muted economic growth in coming months adds to incentive for blenders to maintain low base oils/lubricants stocks.

·        Prospect of smaller-than-usual volume of surplus base oils in Europe and Asia at year-end could limit downward price-pressure and support steadier procurement plans in those regions.

·        Asia’s lube demand likely to hold firm in Q4 2023, even if pace of rebound slows from signs of unexpectedly strong growth at end-Q3 2023.

·        Firmer demand likely to absorb more regional base oils supplies, curbing surplus volumes for other regions.

·        China’s demand for overseas supplies of Group III base oils could face further change amid rapid rise in domestic production in recent months.

·        India’s demand for supplies likely to stay firm amid seasonal pick-up in consumption.

·        Prospect of rise in choice of supply could prompt buyers to hold back before locking in volumes.  

·        Slowdown in Europe’s lube demand shows more signs of bottoming out.

·        Trend would coincide with blenders’ more cautious inventory-management.

·        Trend would support steadier procurement over coming months, even if outright volumes stay lower than usual.

·        Demand for Group I base oils supplies from Europe shows signs of getting sustained boost from Asia.

·        Trend would curb further the availability of Group I supplies in Europe.

·        US demand faces typical seasonal slowdown.

·        Prospect of larger-than-expected availability of supply and lower crude oil prices adds to blenders’ incentive to hold back for now.

·        Mexico’s stricter rules on base oils imports likely to add to size of US supply-surplus at year-end.

·        Blenders in other parts of Latin America could receive offers of more supplies from US as sellers seek alternative outlets instead of Mexico.

·        Trend could curb their interest in surplus supplies from other markets like Asia.