Global base oils - week of Oct 10: Demand outlook

·        Base oils/lubricants buyers likely to be increasingly cautious about inventories and procurement amid prospect of global economic slowdown.

·        Rebounding oil prices raise prospect of higher inflation, so higher interest rates, so slower growth.

·        Strong US jobs growth in September adds to expectations of large rise in interest rates.

·        Rising interest rates likely to complicate financing for base oils trading activity.

·        US currency strength adds to buyers’ costs.

·        US’ September automobile sales rise for second month, adds to signs of still-firm economic activity.

·        US gasoline consumption rises in last week of September to one-month high, falls year on year for 27^th straight week.

·        No Atlantic hurricanes forecast for now.

·        US base oils/lube demand typically starts to ebb from 2H November during winter months.

·        Prospect of steady or lower base oils prices curbs buyers’ urgency to lock in supplies.

·        Brazil’s September automobile sales rise for third month, fastest pace in 15 months.

·        Ongoing flow of arbitrage base oils shipments to Latin America likely to curb demand for US supplies.

·        European economies face prospect of shrinking as costs keep rising.

·        Germany’s August industrial production falls from July, France’s industrial production rises. Output in both markets set to slow over coming months.

·        UK’s September car sales rise for second month. Electric plug-in sales extend strong rise.

·        European base oils sellers typically seek to clear surplus volumes early in the fourth quarter to avoid seasonal slowdown in demand from 2H November.

·        Buyers likely to continue to limit procurement volumes in anticipation of slowdown in demand.

·        Asia-Pacific economies face pressure from weak Chinese growth, rising interest rates, pressure on currencies.

·        China’s September services purchasing managers’ index contracts for first time in four months.

·        China tightens zero-Covid 19 controls ahead of five-year Party Congress as cases rise.

·        Seasonal pick-up in Chinese base oils demand relatively muted.

·        Chinese buyers likely to continue to manage stocks carefully amid uncertainty about location and timing of new lockdowns.

·        India’s September automobile sales rise for fifth time in six months.

·        India’s passenger vehicle, three-wheeler, tractor and commercial vehicle sales rise vs Sep 2019.

·        India’s October automobile sales expected to extend strong rise during festive season.

·        India’s base oils demand likely to get support from seasonal rise in consumption, slowdown in imports.

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