Global base oils – week of Oct 3: Demand outlook

·        Global economic growth set to face sustained pressure from even higher interest rates, high energy costs, slow Chinese demand.

·        Strength of US dollar adds to costs for non-US importers, pressures central banks to raise interest rates.

·        US personal consumption expenditure price index rises more than expected in August.

·        US gasoline demand fell last week for 26^th straight week year on year, holds close to February levels.

·        US lube blenders likely to be more cautious with procurement plans amid signs of sufficient supply, lower prices.

·        Annual US base oils/lube demand typically much lower in Q3/Q4 than in Q1/Q2.

·        Argentina’s August lube consumption and production falls to lowest since start of year.

·        Slowing lube demand in Latin American markets like Argentina and Brazil coincides with arrival of arbitrage shipments from other regions.

·        Slowing demand, rising arbitrage imports likely to curb demand for US supplies.

·        Eurozone September inflation rises to record 10pc, raising prospect of large interest-rate rise in October.

·        Eurozone September economic sentiment index falls to lowest since 2H 2020 on waning confidence among manufacturers and consumers.

·        European blenders likely to procure base oils supplies on need-to basis to maintain flexibility in face of economic slowdown.

·        Signs of healthy supply availability give European blenders more flexibility to procure base oils as and when required.

·        More Asia-Pacific central banks raise interest rates amid currency weakness, inflation that exceeds target levels.

·        Japan’s September manufacturing purchasing managers’ index falls to lowest since early last year.

·        China’s September PMI shows manufacturing expanded for first time in three months as Covid-19 restrictions eased in regions like Chengdu.

·        China’s September non-manufacturing expansion slows.

·        China’s services activity likely to get seasonal boost during week-long public holiday at start of October.

·        China’s August public road passenger kilometers contract at slowest pace in 15 months, suggesting slowdown may be bottoming out.

·        China’s automobile sales rise around 25pc in first four weeks of September year on year at time of year when demand is typically strong.

·        Chinese base oils demand likely to get some support from seasonal rise in consumption after slumping in August.

·        Pick-up in demand likely to be more muted than usual.

·        Prospect of further lockdowns to support zero-Covid policy likely to incentivize Chinese blenders to procure on need-to basis only.

·        SE Asia demand typically slows in second half of year vs first half.

·        Thailand’s August lube demand reflects that trend, with consumption down from 1H 2022 levels.

·        India’s base oils demand likely to get boost from seasonal rise in lube consumption.

·        Signs of healthy availability likely to curb demand for term volumes, boost interest in lower-priced spot supplies.

·        Indian demand for very-light grades likely to remain low.