Global base oils - week of Jan 8: Demand outlook

Global base oils - week of Jan 8: Demand outlook
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·        Crude oil prices stay rangebound at lower levels amid expectations of sufficient supply, muted demand as high interest rates keep pressure on economic activity in key global markets.

·        Diesel premium to crude stays close to six-month low, adding to signs of weaker demand.

·        Globally, lube blenders likely to hold back in anticipation of typical price-weakness at start of each year.

·        Firm base oils values versus crude/competing fuels could add to expectations of downward price pressure.

·        Base oils demand could revive earlier than usual as blenders’ lower inventories would prompt a faster response to any pick-up in finished lube demand.

·        Such a move would contrast with last year when blenders focused on cutting inventories in early 2023.

·        Blenders’ expectations that supply is readily available could curb urgency to replenish stocks and sustain strategy of maintaining low inventories.

·        Strategy leaves blenders more exposed to the possibility of tighter-than-expected supply/earlier-than-expected pick-up in demand.

·        Europe’s base oils demand likely to stay muted until blenders are comfortable that they no longer face the kind of downward price-pressure that the market often sees at the start of the new year.

·        Asia’s base oils demand likely to get support from stock replenishment ahead of seasonal pick-up in lube consumption later in Q1 2024.

·        Demand could get further support from signs of limited supply-build at end-2023 and subsequent expectations of more limited downward price-pressure.

·        China’s base oils demand shows signs of improving even if plentiful supply allows blenders to maintain lower stocks.

·        US domestic base oils demand could stay muted as firm prices and seasonal slowdown in consumption incentivize buyers to hold off.

·        Overseas demand for US export cargoes likely to get support from more competitive prices.

·        Latin America’s demand from US base oils supplies could face pressure from slowdown in structural requirements in markets like Brazil and Mexico, and from weaker lube consumption in Argentina.

Global base oils - week of Jan 8: Demand outlook
Global base oils - week of Jan 8: Price outlook - margins
Global base oils - week of Jan 8: Demand outlook
Global base oils - week of Jan 8: Price outlook - arbitrage

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