· Crude oil prices fall over past week amid concern that US/Europe interest rates will rise higher than expected, slowing growth for longer than expected. · Blenders’ current perception that base oils supply is sufficient curbs urgency to buy, keeping supply more readily available.· Trend highlights how buyers’ perception of supply situation has artificial impact on base oils demand.· Artificial impact on base oils demand may be different from lubricants end-user consumption.· Perception that supply is sufficient gives blenders flexibility to procure supplies as and when required.· Blenders more likely to procure smaller volumes more regularly to retain flexibility if demand continues to fall.· Strategy cuts blenders’ exposure to lower demand and lower value of inventories if prices fall.· Strategy increases blenders’ exposure to stronger-than-expected demand or lower-than-expected supply.· US central bank set to raise interest rates higher than expected for longer than expected. But economic growth signals turn more mixed.· US weekly gasoline demand extends sustained fall; contraction at slowest in almost a year..· Signs of steadier consumption in the Americas market late last year and early this year leave supply more balanced, especially in Latin America.· More balanced fundamentals in Latin America likely to sustain base oil arbitrage opportunities between Europe and Latin America during the year..· Europe’s central bank set to raise interest rates 0.5pc in coming week; high core inflation combined with weak economic growth complicate subsequent rate moves.· UK’s February car sales rise for seventh month; sales of alternative-fuel vehicles hold above 50pc of total sales for sixth month..· Size of slump in European lube demand at end-2022 leaves supply overhang even as refiners cut output.· Factors that cut European lube demand at end-2022 linger in Q1 2023, deterring blenders from replenishing stocks.· More muted seasonal rise in demand from European buyers in recent weeks contrasts with year-earlier, when surge in demand compounded supply tightness and rise in prices.· Scope of recovery in Chinese economic growth and demand for overseas base oils supplies likely to have major impact on size of surplus supplies in Asia-Pacific over coming months.· Lower-than-expected pick-up in Chinese base oils demand would trigger ongoing flow of Asia-Pacific supplies to other markets.· Prospect of more muted/cautious demand in China and India over coming months would curb competition between the two markets to secure supplies.· Avoidance of such competition would limit any supply tightness.· Strength of recovery in Chinese demand shows mixed, contradictory signals.· China’s pick-up in demand following end of Covid lockdowns remains more muted than other countries’ pick-up in demand after their lockdowns ended.· Thailand’s base oils exports to China rebound in January but remain lower than year-earlier levels.· Indonesia moves large volume of Group I supplies to Malaysia in January rather than to China..· Trends add to signs of weaker-than-usual Chinese demand ahead of spring oil-change season over coming weeks.· Chinese demand for overseas supplies should get boost from domestic plant maintenance work over coming months.· Trend suggests recovery in domestic base oils output would cut demand for overseas supplies.· Flows from Taiwan to China rise in February and early March.· Flows from Singapore to China surge in early March..· Pick-up in shipments point to stronger Chinese demand, at least in the short term.· India’s February lube demand slows, curbing blenders’ urgency to lock in more overseas supplies.· Lower February demand curbs impact of domestic plant maintenance, leaves blenders with more supplies ahead of seasonal rise in lube demand in March.· India’s February automobile sales rise year on year and vs February 2021, except for two-wheelers.· India’s March automobile sales likely to get boost from festivals, better availability and prospect of higher vehicle prices from April.· Possibility of weaker-than-usual monsoon season in India because of El Nino conditions could impact rural automobile demand later in the year.· India’s demand for very-light grade base oils could start to ease if regional prices extend rise..Global base oils - week of March 6: Supply outlook
