Global base oils–week of Jul 18: Demand

· Expectations of global recession increase as interest rates rise.

· Central banks implement large interest rate rises to curb inflation.

· US expected to raise interest rates sharply as inflation stays high.

· US consumer sentiment edges up in July from June, stays close to record low.

· Strong US dollar acts as additional break on growth.

· Lube blenders balance firm current demand with prospect of slower consumption.

· Blenders weigh up impact of lower feedstock costs on base oil prices, likely to limit base oils stock-building.

· Base oils demand likely to get ongoing support from supply-chain disruption concerns during hurricane season.

· Consumer confidence more mixed in Latin America.

· Latin America auto sales growth mostly slows in June.

· Balanced base oil supplies in key Latin America markets curb blenders’ need for major replenishment.

· Slower demand gives blenders option of waiting longer for replenishment supplies, boosting feasibility of tapping Asia-Pacific base oil supplies.

· High US diesel prices likely to curb Mexico demand for very-light grade base oils.

· Europe’s central bank to raise interest rates this week for first time in more than a decade to curb high inflation.

· Euro currency weakness adds to inflationary pressures.

· Possibility of energy supply disruptions raise prospect of more severe recession.

· Europe’s car sales fall in June for 11^th time in 12 months.

· Blenders face growing incentive to limit procurement as demand softens, supply improves.

· More Asia-Pacific countries raise interest rates sharply / tighten monetary policy.

· China’s economic outlook mixed – stimulus measures support vs impact of additional lockdowns.

· China's retail sales, auto sales rebound in June year on year.

· Chinese blenders/base oil importers likely to continue to manage supplies cautiously on uncertainty about prospect of/timing of lockdowns.

· Auto sales in rest of Asia mostly rise or shrink more slowly in June.

· Blenders likely to limit additional base oils procurement as crude oil prices hold at lower levels vs March-June.

· India retail diesel prices stay at unusually narrow premium to light-grade base oils.

· India demand for light-grade base oils typically softens when diesel premium is narrow.

· India buyers likely to eye overseas shipments for delivery in September/October, in preparation for festive season.

· India’s monsoon rains exceed typical levels since start of June.