Global base oils–week May 16: Demand

· Global economy faces growing headwinds, especially in Europe, China.

· Slowing economic/industrial growth having increasing impact on lube demand.

· Europe’s economy shows more signs of slowdown.

· Europe’s industrial production falls 0.8pc in March, ending short recovery in February.

· Germany’s ZEW index of economic sentiment falls in April to lowest since March 2020.

· US National Federation of Independent Business survey shows more than half of small businesses raised prices in last three months and almost half plan to raise prices more.

· Lube blenders continue to raise their prices in response to rising feedstock costs.

· Those price increases have so far faced limited resistance.

· Signs of resistance to lube price-increases growing in Europe and Asia especially.

· Weakening European lube demand complicates blenders’ ability to absorb rising base oil prices.

· Steady US/Americas lube demand sustains blenders’ ability to absorb rising costs by raising prices.

· China car sales fall 43pc in Apr to lowest since Feb 2020 – when first Covid-19 lockdowns took place.

· China car sales in early May down sharply yoy. But sales and production recover vs same period in April. Production gradually resuming.

· In China’s first lockdown in early 2020, demand surged when the lockdowns ended.

· Brazil auto sales shrink in April at slower pace than in Q1.

· Argentina auto sales rise in April for second month.

· Disparity between Americas and Europe/China auto sales mirrors divergence in economic performance in different regions.

· India April auto sales up yoy, down vs April 2019. But April passenger car and tractor sales up vs April 2019.

· Rising prices, high fuel prices curbing 2W vehicle demand in India.

· Normal monsoon forecast for India. Monsoon expected to start slightly earlier than usual, in late May.

· Tractor and 2W sales expected to improve if monsoon is evenly distributed.

· Vietnam auto sales rise 40pc in April to historically high levels.

· Base oils demand mixed in Asia-Pacific.

· Still-weak domestic Chinese prices curb attraction of moving supplies to that market.

· High Asia light-grade prices vs India diesel prices typically curb the country's demand for light grades.

· Term contracts linked to gasoil leave prices less attractive than spot prices.

· Demand in Asia-Pacific typically starts to face seasonal slowdown from second half of second quarter. Uncertainty this year is timing of a recovery in Chinese demand.

· Base oil demand in Europe typically wanes from June, ahead of summer lull.