Global base oils – week Jun 6: Demand

· US April/May jobs, consumer spending, trade data point to strong Q2 economic growth.

· US manufacturing purchasing managers index unexpectedly rises in May from April.

· US lube demand surges in March to highest since 2019.

· Latin America demand signals more mixed.

· Argentina and Brazil’s April lube demand slows yoy.

· Argentina’s May auto sales rise for third month and at fastest pace in a year.

· US base oils demand holds firm on strong consumption, stock-building in preparation for hurricane season, concern about even higher prices.

· Brazil base oils demand likely to be steady amid balanced domestic market / slower lube demand growth.

· Europe faces ongoing pressure from weakening consumer demand, high inflation.

· European services sector partially cushioned by post-pandemic bounce.

· Europe’s automobile oil consumption holding up firmer than industrial oils demand.

· Rising motor fuel costs likely to put pressure on travel activity.

· Upcoming tourist season likely to counterbalance that pressure in the short term.

· France’s May car sales fall for 12^th month.

· Europe base oils demand likely to get support from ongoing supply tightness as buyers prioritize security of supply.

· Slowing lube demand likely to complicate blenders’ ability to pass on higher costs.

· Typical seasonal slowdown from July and prospect of easing supply tightness add to buyers’ incentive to hold off/minimize procurement over coming weeks.

· Japan’s industrial production slows in April, consumer demand rises.

· China’s PMI for May points to ongoing contraction, but improvement from April. Services lag manufacturing.

· Rebound in Chinese economic activity as pandemic restrictions ease likely to be smaller than in 2020.

· China’s May car sales set to have fallen at slower pace yoy than April, rise vs April.

· India’s monsoon season began in late May, slightly earlier than usual.

· India’s lube demand typically slows during monsoon season.

· Asia-Pacific base oils demand likely to get some support from firmer Chinese demand.

· Chinese buyers would need to raise prices sharply to make arbitrage to the country more attractive.

· That didn’t happen even in 2020. That time, Chinese prices were already at a steep premium to fob Asia prices.

· Retail diesel prices in India hold steady; their premium to very-light grade base oils falls even more.

· Indian demand for light-grade base oils typically slows when diesel premium is narrower.

· Asia-Pacific base oils demand likely to get supplemented with sustained buying interest from more distant regions like Americas, Mideast Gulf and Europe, where prices remain at steep premium to Asia.