Global base oils demand outlook: Week of 7 Oct

·        Global crude oil prices hold close to highest in more than a month after sharp rebound over past week.

·        Crude oil prices face prospect of higher-than-usual volatility over coming days depending on developments in Middle East.

·        Diesel premium to crude oil stays low, holds above one-year lows reached in recent weeks.

·        Diesel premium holds steady as diesel prices keep pace with surge in crude prices over past week.

·        Base oils prices lag surge in crude prices, triggering slump in base oils margins.

·        Already-firm base oils margins, prospect of seasonal slowdown in demand and sufficient supply curb urgency for blenders to adjust procurement plans in response to recent crude price volatility.

·        Recent crude price volatility could ease downward pressure on base oils prices, removing one factor that added to buyers’ preference to procure smaller volumes to cover requirements.

·        Asia’s base oils demand could be steady-to-weak, with buyers seeking to cover requirements and holding off locking in any additional volumes.

·        China’s firm domestic prices and India’s firm imported light-grade cargo prices vs FOB Asia prices points to firm underlying buying interest in those markets.

·        Europe’s Group II base oils demand could face pressure amid more competitive prices for Group I and Group III base oils.

·        Overseas demand for Europe’s Group I base oils could stay more muted after domestic prices weaken sharply versus export prices in recent weeks.

·        Buyers could hold back until they are confident they face little exposure to a drop in export prices, following fall in domestic prices in H2 Sept 2024. 

·        US base oils demand could extend slowdown as buyers focus on trimming inventories that they built up during Q3 2024.

·        Seasonal slowdown in demand in US and Latin America in coming weeks, and expectations of improving availability of supply, adds to buyers’ preference to hold lower stocks.