Global base oils – week of Nov 7: Demand outlook

·        Lube blenders’ Q3 sales rise more because of higher selling prices, less because of higher sales volumes.

·        Blenders’ squeezed margins in Q3 contrast with many premium-grade base oils producers’ firm margins.

·        Trend suggests blenders faced more resistance from end-users to higher selling prices.

·        Trend highlights weak end-user demand, incentivizes blenders to manage stocks carefully.

·        US interest rates likely to stay higher for longer, adding to pressure on global economic growth.

·        Firm October US jobs growth adds to expectations of even higher interest rates.

·        US’ October automobile sales rise for third month, at fastest pace in more than a year.

·        Seasonal, economic slowdown incentivizes blenders to hold back, increases importance of stock management.

·        US weekly gasoline demand falls at end-October for 31^st straight week.

·        Europe’s October manufacturing PMI falls to lowest since May 2020, signalling contraction.

·        UK central bank raises interest rates to highest in more than a decade, forecasts UK recession to extend into 2024.

·        UK’s October car sales rise for third month, at fastest pace since January.

·        Electric/hybrid vehicles account for more than half of UK’s October car sales.

·        France’s October car sales rise for 3^rd month; share of electric/hybrid vehicles holds at more than 22pc.

·        Rising US interests put pressure on other regions’ currencies, add to inflation pressures.

·        China reaffirms zero-Covid policy as Covid cases climb to six-month high.

·        Chinese blenders likely to continue to procure small volumes, maintain low stocks amid uncertainty about lockdowns / demand prospects.

·        Chinese blenders less likely to seek to start building stocks early ahead of lunar new year holidays amid ongoing uncertainty about demand.

·        Delayed stock-building raises prospect of stronger pick-up in buying by Chinese blenders early next year.

·        China’s October car sales likely rise more than 10pc year on year, edge down from September.

·        India’s September lube demand outpaces supply – raising prospect of need to replenish stocks.

·        Demand likely to pick up once buyers are comfortable that prices have bottomed out.

·        India’s demand for very-light grades likely to remain muted.

·        Possibility of pick-up in China, India demand coinciding.