· US gasoline demand rises for sixteenth week in early July and at fastest pace in more than a year..· US auto sales expected to hold firm in 2H 2023 as pent-up demand counters impact of higher borrowing costs.· Auto sales hold firm in June in Latin America’s largest markets..· Lack of any additional US refinery posted-price adjustments in July suggest refiners face less pressure to cut prices.· Refiners’ steady prices follows a supplier’s move to cut its Group III posted prices at beginning of July.· Prospect of steady prices removes one obstacle deterring blenders from delaying procurement plans.· Other deterrents remain, with perception that supply remains readily available amid seasonal slowdown in demand.· Blenders could face tighter-than-expected supply if arbitrage remains open to remove surplus US supplies from domestic market, and arbitrage stays shut to move cargoes from other regions to Americas.· Blenders’ structural moves to hold smaller inventories magnify weaker US demand so far this year.· Completion of those moves likely to spur pick-up in demand as blenders replenish inventories more frequently with smaller volumes. · US’ steady imports of Group I and Group II base oils so far this year contrast with signs of slower demand for Group III base oils..· Trend suggests US’ lube demand weakness concentrated more in passenger car engine oils, with steadier consumption of other lubricant grades.· European base oils demand likely to remain muted over coming weeks as seasonal slowdown compounds blenders’ moves to maintain lower stocks.· Seasonal pick-up in demand later in Q3 2023 likely to be stronger than last year, when blenders had large supply overhang. · Portugal’s lube demand extends contraction through May amid extended regionwide slowdown in consumption.· Trend likely to leave blenders with lean base oils stocks heading into Q3 2023, contrasting with more bloated inventories during same period a year earlier.· Scenario could trigger pick-up in base oils demand later in Q3 2023 even if outright lube demand remains muted.· Spain’s May lube demand rises strongly from April to levels similar to month of May in 2018 and 2019, before the Covid-19 pandemic disrupted typical consumption patterns..· Any relative demand-strength that exceeds expectations would contrast with blenders’ moves to limit stocks in anticipation of weaker demand.· Cost of Turkey’s Group I imports from European sources like Italy rise more than imports of Russian origin in May..· Cost difference between supplies from Italy and Russia stays small enough to continue to attract more demand for base oils from Europe.· Trend suggests price for Russian base oils needs to be at much steeper discount to supplies of European origin to attract demand from Turkish buyers.· Turkey’s importance as key outlet for supplies of Russian origin leaves Russian producers with choice of cutting prices further to attract demand or cutting output if prices are deemed to be too low.· Turkey’s imports of premium grades get boost in Q2 2023 from pick-up in supplies from Netherlands and wave of arbitrage shipments from South Korea..· Plentiful premium-grade supplies in Europe and open arbitrage from Asia raise prospect of continuation of those flows over coming months.· Like Group I base oils, Turkey’s imports of premium-grade base oils from Russia trends lower so far this year.· Composition of Israel’s base oils imports changes this year, with unusual pick-up in supplies from Estonia and revival in shipments from South Korea.· Trend reflects changing trade flows in response to sanctions, competitive prices for premium grades, and open arbitrage from Asia..Global base oils - week of July 17: Price outlook - margins
· US gasoline demand rises for sixteenth week in early July and at fastest pace in more than a year..· US auto sales expected to hold firm in 2H 2023 as pent-up demand counters impact of higher borrowing costs.· Auto sales hold firm in June in Latin America’s largest markets..· Lack of any additional US refinery posted-price adjustments in July suggest refiners face less pressure to cut prices.· Refiners’ steady prices follows a supplier’s move to cut its Group III posted prices at beginning of July.· Prospect of steady prices removes one obstacle deterring blenders from delaying procurement plans.· Other deterrents remain, with perception that supply remains readily available amid seasonal slowdown in demand.· Blenders could face tighter-than-expected supply if arbitrage remains open to remove surplus US supplies from domestic market, and arbitrage stays shut to move cargoes from other regions to Americas.· Blenders’ structural moves to hold smaller inventories magnify weaker US demand so far this year.· Completion of those moves likely to spur pick-up in demand as blenders replenish inventories more frequently with smaller volumes. · US’ steady imports of Group I and Group II base oils so far this year contrast with signs of slower demand for Group III base oils..· Trend suggests US’ lube demand weakness concentrated more in passenger car engine oils, with steadier consumption of other lubricant grades.· European base oils demand likely to remain muted over coming weeks as seasonal slowdown compounds blenders’ moves to maintain lower stocks.· Seasonal pick-up in demand later in Q3 2023 likely to be stronger than last year, when blenders had large supply overhang. · Portugal’s lube demand extends contraction through May amid extended regionwide slowdown in consumption.· Trend likely to leave blenders with lean base oils stocks heading into Q3 2023, contrasting with more bloated inventories during same period a year earlier.· Scenario could trigger pick-up in base oils demand later in Q3 2023 even if outright lube demand remains muted.· Spain’s May lube demand rises strongly from April to levels similar to month of May in 2018 and 2019, before the Covid-19 pandemic disrupted typical consumption patterns..· Any relative demand-strength that exceeds expectations would contrast with blenders’ moves to limit stocks in anticipation of weaker demand.· Cost of Turkey’s Group I imports from European sources like Italy rise more than imports of Russian origin in May..· Cost difference between supplies from Italy and Russia stays small enough to continue to attract more demand for base oils from Europe.· Trend suggests price for Russian base oils needs to be at much steeper discount to supplies of European origin to attract demand from Turkish buyers.· Turkey’s importance as key outlet for supplies of Russian origin leaves Russian producers with choice of cutting prices further to attract demand or cutting output if prices are deemed to be too low.· Turkey’s imports of premium grades get boost in Q2 2023 from pick-up in supplies from Netherlands and wave of arbitrage shipments from South Korea..· Plentiful premium-grade supplies in Europe and open arbitrage from Asia raise prospect of continuation of those flows over coming months.· Like Group I base oils, Turkey’s imports of premium-grade base oils from Russia trends lower so far this year.· Composition of Israel’s base oils imports changes this year, with unusual pick-up in supplies from Estonia and revival in shipments from South Korea.· Trend reflects changing trade flows in response to sanctions, competitive prices for premium grades, and open arbitrage from Asia..Global base oils - week of July 17: Price outlook - margins