· Base oils buyers prefer to hold back amid seasonal slowdown, concern about economic slowdown, and crude price volatility.· Buyers reluctant to lock in supplies at time of year when prices are typically at steep discount to prices in a few months’ time.· Reluctance to lock in supplies compounds current demand weakness, highlights limited tools to manage risk of building stocks now.· Reluctance to lock in supplies adds to market volatility, raises prospect of steeper price adjustment next year when demand revives and supply tightens.· Such a trend happens most years.· IEA sees oil demand in China rebounding in 2023 after contracting this year, drop in oil output from Russia.· IEA sees possibility of oil price rally as oil balance tightens in Q2 2023.· Global economy braces for slowdown or recession in coming months.· Slowing growth, high interest rates show signs of quelling inflation.· US Fed set to extend rate rises into 2023, keep rates higher for longer to quell inflation.· US economy shows more signs of slowing, inflation shows more signs of having peaked.· US industrial production, retail sales fall in November from previous month, pointing to slower economic growth.· US gasoline demand falls last week for 37th straight week, at fastest pace in 21 months..· US, Argentina November automobile sales rise more slowly, Chile sales extend contraction..· Base oils buyers in Latin America likely to seek more supplies from US amid slowdown in arbitrage flows from other markets.· European central bank raises interest rates, with more to come.· Eurozone December flash PMI points to slowing contraction, easing inflation pressures vs November.· UK central bank raises interest rates to 14-year high; indicates more rate increases may be required to return inflation to target. · Europe’s November car sales rise as fastest pace in 18 months..· Spain’s October lube demand falls year on year for third time in four months, rises from September.· West Africa demand for US base oils likely to be lower in 2023 than in 1H 2022 amid rise in availability of Russian supplies in Turkey and Mideast Gulf.· Asia-Pacific base oils demand likely to remain muted for now.· Lower base oils shipments to southeast Asia in Q4 erode a key counterweight to drop in Chinese demand over past year.· Slowdown in shipments to southeast Asia likely reflects easing demand growth; firm retail activity in markets like Indonesia and Vietnam likely to limit downside.· Prospect of firmer Chinese demand in 2023 likely to balance out slowdown in southeast Asia demand.· Chinese buyers face dilemma of securing supplies to meet expected rise in demand during spring oil-change season.· Buyers also face risk of fall in lube demand in short term if rise in Covid-19 infections causes widespread disruption.· Those concerns likely to boost attraction of supplies from domestic producers, but leave market exposed to risk of supply tightness when demand revives.· China’s car sales edge down in 1H Dec year on year, rise strongly from November.· India’s demand for very-light grade base oils unlikely to improve any time soon; retail diesel premium to regional base oil prices stays narrow..Global base oils - week of Dec 12: Supply outlook
· Base oils buyers prefer to hold back amid seasonal slowdown, concern about economic slowdown, and crude price volatility.· Buyers reluctant to lock in supplies at time of year when prices are typically at steep discount to prices in a few months’ time.· Reluctance to lock in supplies compounds current demand weakness, highlights limited tools to manage risk of building stocks now.· Reluctance to lock in supplies adds to market volatility, raises prospect of steeper price adjustment next year when demand revives and supply tightens.· Such a trend happens most years.· IEA sees oil demand in China rebounding in 2023 after contracting this year, drop in oil output from Russia.· IEA sees possibility of oil price rally as oil balance tightens in Q2 2023.· Global economy braces for slowdown or recession in coming months.· Slowing growth, high interest rates show signs of quelling inflation.· US Fed set to extend rate rises into 2023, keep rates higher for longer to quell inflation.· US economy shows more signs of slowing, inflation shows more signs of having peaked.· US industrial production, retail sales fall in November from previous month, pointing to slower economic growth.· US gasoline demand falls last week for 37th straight week, at fastest pace in 21 months..· US, Argentina November automobile sales rise more slowly, Chile sales extend contraction..· Base oils buyers in Latin America likely to seek more supplies from US amid slowdown in arbitrage flows from other markets.· European central bank raises interest rates, with more to come.· Eurozone December flash PMI points to slowing contraction, easing inflation pressures vs November.· UK central bank raises interest rates to 14-year high; indicates more rate increases may be required to return inflation to target. · Europe’s November car sales rise as fastest pace in 18 months..· Spain’s October lube demand falls year on year for third time in four months, rises from September.· West Africa demand for US base oils likely to be lower in 2023 than in 1H 2022 amid rise in availability of Russian supplies in Turkey and Mideast Gulf.· Asia-Pacific base oils demand likely to remain muted for now.· Lower base oils shipments to southeast Asia in Q4 erode a key counterweight to drop in Chinese demand over past year.· Slowdown in shipments to southeast Asia likely reflects easing demand growth; firm retail activity in markets like Indonesia and Vietnam likely to limit downside.· Prospect of firmer Chinese demand in 2023 likely to balance out slowdown in southeast Asia demand.· Chinese buyers face dilemma of securing supplies to meet expected rise in demand during spring oil-change season.· Buyers also face risk of fall in lube demand in short term if rise in Covid-19 infections causes widespread disruption.· Those concerns likely to boost attraction of supplies from domestic producers, but leave market exposed to risk of supply tightness when demand revives.· China’s car sales edge down in 1H Dec year on year, rise strongly from November.· India’s demand for very-light grade base oils unlikely to improve any time soon; retail diesel premium to regional base oil prices stays narrow..Global base oils - week of Dec 12: Supply outlook