Global base oils – week Jun 13: Demand

· OECD slashes global economic growth forecast for 2022, with many of the hardest-hit countries in Europe.

· OECD sees global inflation peaking later and higher than previously forecast.

· European Central Bank revises down sharply economic growth forecasts for 2022 and following two years.

· ECB to raise interest rates in July for first time in more than a decade in bid to tame unusually high inflation.

· Germany’s car sales fall in May for third month, pressured by shortage of primary and intermediate products and high raw material prices.

· UK’s car sales fall in May for third month to second weakest for month of May in three decades on component shortages.

· Europe base oils demand likely to get support from ongoing supply tightness / concern about security of supply / concern about higher prices.

· But blenders face growing incentive to manage stocks carefully in anticipation of seasonal slowdown in lube demand.

· Weaker-than-usual lube consumption also slows blenders’ consumption of existing base oil supplies.

· Slowing lube demand complicates blenders’ ability to pass on rising feedstock costs.

· Expectations of improving supply as maintenance draws to a close adds to blenders’ incentive to manage stock levels carefully.

· US economic growth set to slow as persistently high inflation keeps pressure on plans for further interest rate hikes.

· US consumer sentiment index for June falls more than expected to record low.

· But US economic growth/consumer spending remains strong in Q2.

· US auto sales fall in May for 10^th month amid tight supply, rising prices.

· Rising US retail fuel prices raise prospect of curbing consumption.

· US lube demand likely to get support for now from strong economic/industrial/services activity.

· Slower Latin American lube demand growth complicates blenders’ leverage to pass on higher costs.

· US base oils demand likely to hold firm on strong end-user demand / stock-building as supply buffer during hurricane season.

· Americas base oils buyers likely to target Asia-Pacific supplies at more competitive prices.

· Asia-Pacific economic growth set to face pressure from rising costs/higher interest rates.

· India’s central bank raises interest rates, sees firm economic recovery.

· India’s passenger car and tractor sales rise in May vs May 2019. Sales of 2W, 3W and commercial vehicles fall vs May 2019.

· Indian government’s move to cut excise duty on fuel prices seen boosting demand for 2W vehicles especially.

· India’s May lube demand sees seasonal slowdown, curbs blenders’ urgency to procure more supplies.

· Steady retail diesel prices in India maintain narrower-than-usual premium to light-grade base oil prices.

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

· China’s economic growth remains uncertain amid prospect of further lockdowns over coming months.

· Re-imposition of lockdowns in parts of Shanghai highlight stop-start nature of any recovery.

· China’s car sales show signs of gradual recovery, but still falling sharply yoy.

· China’s passenger car retail sales likely fell more than 15pc in May yoy but rose more than 25pc from April.

· Car sales likely fell even more slowly in first week of June yoy.

· Uncertainty about timing of any further lockdowns in China complicates blenders’ production plans.

· Asia-Pacific base oils demand could get support from concern about higher prices in response to rising crude prices.

· Asia-Pacific base oils demand gets little support from concern about security of supply, which is readily available.