Global base oils - week of Jan 9: Demand outlook

·        Crude oil prices fall, stay volatile but hold above key $70/bl support level.

·        US manufacturing contracts in December for second month; falling prices curb inflation pressures.

·        US jobs, wage growth slow in December, boosting expectations of smaller rise in interest rates.

·        US weekly gasoline demand falls at end-December for 40^th straight week.

·        Europe’s core inflation extends rise in December, raising expectations of continuation of steep interest rate increases.

·        China’s rapid removal of Covid-related restrictions raises concern of less rapid economic recovery amid uncertainty about impact of sudden surge in infections.

·        Concern about global economic slowdown deters base oils buyers from replenishing stocks at current, lower price levels.

·        Reluctance to buy likely to trigger larger wave of demand in few weeks’ time, when supply is tighter.

·        Firm US base oils/lube demand in 2H 2022 helps limit size of supply overhang at year-end.

·        Argentina’s lube demand shrinks in Q4 2022 amid slowing economic growth.

·        Brazil’s demand for US shipments likely to be steadier early this year amid more balanced domestic supplies.

·        Europe’s October lube demand slows unusually sharply from September amid pressure from sliding industrial oils consumption.

·        Europe’s firm PCMO consumption likely to support demand for Group III base oils.

·        Ongoing engine oils demand strength would cushion size of slowdown in regional lube consumption.

·        A drop in engine oils demand would remove the key support for regional consumption.

·        Germany’s October lube exports slump, pointing to weaker demand in coming months.

·        Germany’s October engine oils demand holds firm, mirroring other markets like Italy.

·        UK’s December car sales rise for fifth month; alternative-powered vehicle sales rise to record high.

·        France’s December car sales edge down for the first time in five months.

·        Turkey’s surge in demand for spot base oils shipments from Russia could level off as term buyers stick with required volume of European base oils.

·        A saturated Turkish market would increase urgency for Russian supplies to target other more distant markets.

·        Prospect of recovery in Chinese base oils demand set to boost competition for Asia-Pacific supplies.

·        Seasonal rise in Chinese demand likely to coincide with economic boost from end of zero-Covid policy, adding to requirements.

·        China’s low base oils output in Q4 2022 leaves blenders’ stocks unusually low ahead of peak demand season after lunar new year holidays.

·        China’s December car sales likely rose year on year and from November.

·        Relaxation of Covid restrictions and end of new-energy-vehicle subsidies from end-2022 boost December’s vehicle demand.

·        China’s 2022 car sales likely edge up from 2021 levels.

·        Like Europe, firm engine oil demand in Asia-Pacific counters pressure from sliding industrial oils consumption.

·        Firm engine oil demand in Asia-Pacific partly reflects support from domestic markets. Weak industrial oils demand partly reflects economic slowdown in overseas markets like Europe/US.

·        Asia-Pacific PCMO demand likely to get further boost from pick-up in tourism activity as China ends zero-Covid quarantine restrictions.

·        India’s demand for very-light-grade base oils likely to remain muted.

·        India’s December passenger car sales rise for eighth month in nine, tractor sales up for third month.

·        India’s automobile demand likely to face pressure from higher interest rates and rising vehicle prices in response to upcoming adoption of Bharat VI phase 2 emissions standards.

·        Electric rickshaws account for close to 50pc of India’s December three-wheeler vehicle sales.