· Rising crude oil/diesel prices likely to support upward pressure on base oils prices, prompting buyers to bring forward procurement plans.· Steep discount of US/Europe export prices to domestic prices by contrast points to ongoing fundamentals weakness.· Growing pressure on base oils margins adds to signs of supply-demand weakness.· Any signs of tighter supply/firmer demand typically triggers a narrowing of export-domestic price-spread and firmer margins.· Mixed price signals could prompt round of more cautious stock-replenishment..· Brazil’s December lube demand falls for first time in eight months as industrial oils, heavy-duty engine oil consumption falls..· Weaker lube demand raises prospect of fall in Latin America’s lube consumption at year-end, lower requirements at start of this year.· Brazil’s weaker lube demand set to coincide with revival in domestic base oils output.· Trend likely to curb demand for overseas base oils supplies.· Trend increases importance of US base oils prices staying competitive to maximise share of demand supplied by US refiners..· Europe’s base oils demand likely to improve once buyers are confident that prices are likely to hold steady or rise.· Rising crude oil prices and squeezed base oils margins likely to limit or halt downward price pressure.· Signs of smaller regional supply surplus this year than last year, and blenders’ lower stocks this year than last year, likely to add to pick-up in demand.· Buyers likely to limit size of inventories even with any revival in demand.· Italy’s December lube demand rises for seventh month as strong auto lube consumption outweighs fall in industrial oils consumption..· More muted lube demand growth and falling industrial oils consumption could incentivize blenders to maintain lower lube and base oils inventories.· Italy’s more mixed lube demand would also curb need for blenders to replenish their inventories more frequently.· Trend highlights Europe’s current reliance on markets like Italy to support steadier lube demand in the region, and the impact of any subsequent slowdown in demand in those markets..· France’s November lube demand falls for ninth time in ten months..· Slowdown in consumption magnifies impact of seasonal slowdown in demand at year-end.· Sustained slowdown in consumption and expectations of sufficient base oils supply incentivize blenders to maintain low stocks.· Sustained slowdown in demand in key markets like France and Germany counters firmer consumption in Mediterranean market, leaving regional demand relatively steady at low levels.· Any signs of steadier regional lube demand facilitates refiners’ base oils supply plans, curbs risk of oversupply..· Demand is likely to rise in key Africa markets like Nigeria, Egypt and Kenya following a slowdown in shipments to those markets at end-2023..· Size of fall in shipments likely exceeds pace of any slowdown in domestic lube demand in those markets.· Any pick-up in demand in those markets provides a valuable outlet for surplus supplies from US and Europe at start of 2024..Global base oils - week of Jan 29: Price outlook - margins.Global base oils - week of Jan 29: Price outlook - arbitrage.Asia base oils - week of Jan 29: Demand outlook
· Rising crude oil/diesel prices likely to support upward pressure on base oils prices, prompting buyers to bring forward procurement plans.· Steep discount of US/Europe export prices to domestic prices by contrast points to ongoing fundamentals weakness.· Growing pressure on base oils margins adds to signs of supply-demand weakness.· Any signs of tighter supply/firmer demand typically triggers a narrowing of export-domestic price-spread and firmer margins.· Mixed price signals could prompt round of more cautious stock-replenishment..· Brazil’s December lube demand falls for first time in eight months as industrial oils, heavy-duty engine oil consumption falls..· Weaker lube demand raises prospect of fall in Latin America’s lube consumption at year-end, lower requirements at start of this year.· Brazil’s weaker lube demand set to coincide with revival in domestic base oils output.· Trend likely to curb demand for overseas base oils supplies.· Trend increases importance of US base oils prices staying competitive to maximise share of demand supplied by US refiners..· Europe’s base oils demand likely to improve once buyers are confident that prices are likely to hold steady or rise.· Rising crude oil prices and squeezed base oils margins likely to limit or halt downward price pressure.· Signs of smaller regional supply surplus this year than last year, and blenders’ lower stocks this year than last year, likely to add to pick-up in demand.· Buyers likely to limit size of inventories even with any revival in demand.· Italy’s December lube demand rises for seventh month as strong auto lube consumption outweighs fall in industrial oils consumption..· More muted lube demand growth and falling industrial oils consumption could incentivize blenders to maintain lower lube and base oils inventories.· Italy’s more mixed lube demand would also curb need for blenders to replenish their inventories more frequently.· Trend highlights Europe’s current reliance on markets like Italy to support steadier lube demand in the region, and the impact of any subsequent slowdown in demand in those markets..· France’s November lube demand falls for ninth time in ten months..· Slowdown in consumption magnifies impact of seasonal slowdown in demand at year-end.· Sustained slowdown in consumption and expectations of sufficient base oils supply incentivize blenders to maintain low stocks.· Sustained slowdown in demand in key markets like France and Germany counters firmer consumption in Mediterranean market, leaving regional demand relatively steady at low levels.· Any signs of steadier regional lube demand facilitates refiners’ base oils supply plans, curbs risk of oversupply..· Demand is likely to rise in key Africa markets like Nigeria, Egypt and Kenya following a slowdown in shipments to those markets at end-2023..· Size of fall in shipments likely exceeds pace of any slowdown in domestic lube demand in those markets.· Any pick-up in demand in those markets provides a valuable outlet for surplus supplies from US and Europe at start of 2024..Global base oils - week of Jan 29: Price outlook - margins.Global base oils - week of Jan 29: Price outlook - arbitrage.Asia base oils - week of Jan 29: Demand outlook