· US base oils demand set to extend fall amid seasonal slowdown.· Demand could face further downward pressure if buyers deem prices to be lagging weaker fundamentals or if they deem surplus supply to be rising fast.· Demand could face less downward pressure if supply surplus remains manageable and prices are deemed to reflect market fundamentals.· Recent drop in spot and posted prices could deter demand in short term but raise expectations that prices are keeping pace with weaker fundamentals..· Latin America’s base oils demand shows mixed signals.· Latin America’s lube demand likely fell in Oct 2024 amid muted consumption growth in Brazil..· More muted growth would be insufficient to counter any extension of slowdown in consumption in markets like Mexico and Argentina.· Slowdown in lube demand would compound seasonal dip in consumption and cut requirements for base oils from markets like US.· Brazil’s base oils demand could conversely stay firmer than usual in Q4 2024 amid signs of dip in imports in Oct 2024, raising prospect of supply lagging demand.· Brazil’s lube demand exceeds base oils imports in Oct 2024 by largest amount in more than four years..· Demand had lagged imports in Sept 2024.· Any supply shortfall would balance out surplus from end-Q3 2024, leaving fundamentals relatively balanced heading into Nov-Dec 2024.· Any signs of Brazil’s supply-demand fundamentals staying relatively balanced at year-end would contrast with large supply-build at end-2023 and early 2024.· More balanced fundamentals would support earlier recovery in base oils demand..· Closed arbitrage from Asia to Americas likely to boost Latin America’s demand for base oils supplies from US when blenders seek to replenish stocks.· South Korea’s base oils exports to Latin America already fall in Oct 2024 to lowest level in more than two years..· Drop in exports coincides with increasingly competitive US export prices versus Asia prices.· Drop in exports limits alternative supply options for buyers in Latin America..· Brazil’s base oils imports from US in Oct 2024 account for lowest share of its total imports since beginning of 2023..· Shrinking share of imports from US contrasts with rise in share from South Korea to multi-year high.· Closed arbitrage from Asia to Americas likely to halt that dynamic over coming months..· Europe’s base oils demand faces pressure from seasonal slowdown in lube consumption, healthy availability of supply.· Demand for Group III base oils without full set of OEM approvals could get boost from increasingly competitive price vs Group I and Group II base oils and vs Group III base oils with full set of approvals..· Europe’s Group II price premium to US export prices steadies in recent weeks after widening in Aug-Sept 2024.· Premium stays much lower than in Q1 2024..· Steadier premium at lower level could point to pressure on supply-demand fundamentals, deterring additional shipments.· Overseas demand for Europe Group I supplies likely to stay muted as arbitrage stays shut and buyers eye supplies from other markets instead. .· Demand in Middle East likely to stay muted as expectations of pick-up in supplies incentivizes buyers to hold back.· Asia’s base oils exports to Middle East already rebound in Oct 2024, raising prospect of boosting region’s supplies in Nov 2024..· More feasible arbitrage from US to Middle East could support further rise in shipments.· US exports to Middle East already rise to four-month high in Sept 2024 even when arbitrage was harder to work..· Global base oils exports to key markets in Africa extend fall in Sept 2024 for seventh time in eight months from year-earlier levels..· Trend reflects structurally-tighter supply in Europe and sporadic availability of surplus supplies in other markets like US and Asia.· Trend highlights incentive for buyers to target suppliers that are able to provide more regular shipments.· Trend highlights incentive for buyers to cut share of supplies that consist of spot shipments that rely on open arbitrage to the region.· Trend boosts attraction of markets like South Africa as key outlets for swathe of new production capacity that is set to come online in Asia over the coming year..Asia base oils demand outlook: Week of 25 Nov.Global base oils demand outlook: Week of 25 Nov.Global base oils margins outlook: Week of 25 Nov.Global base oils arb outlook: Week of 25 Nov
· US base oils demand set to extend fall amid seasonal slowdown.· Demand could face further downward pressure if buyers deem prices to be lagging weaker fundamentals or if they deem surplus supply to be rising fast.· Demand could face less downward pressure if supply surplus remains manageable and prices are deemed to reflect market fundamentals.· Recent drop in spot and posted prices could deter demand in short term but raise expectations that prices are keeping pace with weaker fundamentals..· Latin America’s base oils demand shows mixed signals.· Latin America’s lube demand likely fell in Oct 2024 amid muted consumption growth in Brazil..· More muted growth would be insufficient to counter any extension of slowdown in consumption in markets like Mexico and Argentina.· Slowdown in lube demand would compound seasonal dip in consumption and cut requirements for base oils from markets like US.· Brazil’s base oils demand could conversely stay firmer than usual in Q4 2024 amid signs of dip in imports in Oct 2024, raising prospect of supply lagging demand.· Brazil’s lube demand exceeds base oils imports in Oct 2024 by largest amount in more than four years..· Demand had lagged imports in Sept 2024.· Any supply shortfall would balance out surplus from end-Q3 2024, leaving fundamentals relatively balanced heading into Nov-Dec 2024.· Any signs of Brazil’s supply-demand fundamentals staying relatively balanced at year-end would contrast with large supply-build at end-2023 and early 2024.· More balanced fundamentals would support earlier recovery in base oils demand..· Closed arbitrage from Asia to Americas likely to boost Latin America’s demand for base oils supplies from US when blenders seek to replenish stocks.· South Korea’s base oils exports to Latin America already fall in Oct 2024 to lowest level in more than two years..· Drop in exports coincides with increasingly competitive US export prices versus Asia prices.· Drop in exports limits alternative supply options for buyers in Latin America..· Brazil’s base oils imports from US in Oct 2024 account for lowest share of its total imports since beginning of 2023..· Shrinking share of imports from US contrasts with rise in share from South Korea to multi-year high.· Closed arbitrage from Asia to Americas likely to halt that dynamic over coming months..· Europe’s base oils demand faces pressure from seasonal slowdown in lube consumption, healthy availability of supply.· Demand for Group III base oils without full set of OEM approvals could get boost from increasingly competitive price vs Group I and Group II base oils and vs Group III base oils with full set of approvals..· Europe’s Group II price premium to US export prices steadies in recent weeks after widening in Aug-Sept 2024.· Premium stays much lower than in Q1 2024..· Steadier premium at lower level could point to pressure on supply-demand fundamentals, deterring additional shipments.· Overseas demand for Europe Group I supplies likely to stay muted as arbitrage stays shut and buyers eye supplies from other markets instead. .· Demand in Middle East likely to stay muted as expectations of pick-up in supplies incentivizes buyers to hold back.· Asia’s base oils exports to Middle East already rebound in Oct 2024, raising prospect of boosting region’s supplies in Nov 2024..· More feasible arbitrage from US to Middle East could support further rise in shipments.· US exports to Middle East already rise to four-month high in Sept 2024 even when arbitrage was harder to work..· Global base oils exports to key markets in Africa extend fall in Sept 2024 for seventh time in eight months from year-earlier levels..· Trend reflects structurally-tighter supply in Europe and sporadic availability of surplus supplies in other markets like US and Asia.· Trend highlights incentive for buyers to target suppliers that are able to provide more regular shipments.· Trend highlights incentive for buyers to cut share of supplies that consist of spot shipments that rely on open arbitrage to the region.· Trend boosts attraction of markets like South Africa as key outlets for swathe of new production capacity that is set to come online in Asia over the coming year..Asia base oils demand outlook: Week of 25 Nov.Global base oils demand outlook: Week of 25 Nov.Global base oils margins outlook: Week of 25 Nov.Global base oils arb outlook: Week of 25 Nov
