Global base oils - week of Jan 23: Demand outlook

·        Crude oil prices rise to two-month high on confidence of strong economic recovery in China, smaller-than-expected slowdown in US/Europe.

·        China’s firmer-than-forecast economic performance in December raises expectations of faster recovery following removal of most Covid restrictions.

·        OPEC sees strong recovery in China’s oil demand in 2023 following relaxation of Covid restrictions.

·        IEA sees oil demand rising to record high in 2023, while oil supply growth slows.

·        Falling US industrial production and retail sales and slowing producer price increases in December add to expectations that US interest-rate increases close to peaking.

·        US gasoline demand falls last week for 42nd week to lowest in almost two years.

·        Auto sales growth slows in December in key Americas markets.

·        Germany’s investor sentiment rebounds in January, boosting confidence of smaller-than-expected economic slowdown in Europe.

·        Seasonal and economic slowdown cut Spain’s lube demand in November for third month and France’s lube demand for sixth month.

·        Concern about further fall in lube demand deters blenders from replenishing stocks, raises risk of wave of stock-replenishment squeezed into smaller time period later in Q1 2023.

·        Asia-Pacific base oils demand likely to rise on higher crude prices, seasonal pick-up in demand, China recovery, upcoming festivals in southeast Asia.

·        Expectations that prices have bottomed out likely to add to demand.

·        Stronger Chinese demand impacts Asia-Pacific trade flows at end-2022 even before any significant pick-up in requirements following end of zero-Covid policy.

·        Stronger rise in China’s requirements over coming months set to have even larger impact on trade flows.

·        Stronger rise in China’s requirements likely to tighten regional base oils availability unless refiners raise output.

·        Chinese blenders’ low inventories and preference to hold off stock-building likely to add to pick-up in demand after lunar new year holidays.

·        China’s car sales fall in first-half January vs first-half December and year on year.

·        India’s demand for overseas Group II light- and heavy-grade supplies likely to get a boost as buyers seek alternative shipments in response to drop in supplies from Taiwan.

·        India’s strong demand for Group III 4cst base oils highlights underlying strength of country’s lube consumption.

·        India’s firm demand and high prices for Group III 4cst highlight impact of price volatility on demand for other base oils grades, suggest demand likely to improve when prices stabilize.

·        India’s demand for very-light grade base oils could slow if rising regional gasoil prices add to upward pressure on base oils prices, while domestic retail diesel prices hold steady.