Global base oils tight supply could lengthen in Q4 on manufacturing woes, interest rates – ICIS

RIO DE JANEIRO (ICIS)–Base oils supply is to remain tight in the third quarter but could lengthen by year end as the US manufacturing recession and high interest rates take their toll, an expert at ICIS said on Tuesday.

Amanda Hay, senior analyst for base oils in the Americas at ICIS, said that high interest rates in the US and elsewhere are causing that “no-one is building inventories” due to the high costs associated to it.

Hay went on to say that only a few months ago most economists and analysts – including those at ICIS – were forecasting interest rates cuts by the US Federal Reserve (Fed) in 2024.

However, that has now shifted to 2025 at the earliest, as the world’s major central bank seeks to make sure inflation falls towards its 2% target.

The US’ annual rate of inflation stood at 3.3% in May.

Hay was speaking to delegates at the 14th International Summit with the South American Market 2024 organized by specialized publication Lubes em Focus, which focuses on base oils.

ICIS is a partner in the event.

“As the US manufacturing recession continues, exports from that country continue to be widely available. Firm crude prices will also be a factor to keep in mind,” said Hay.

“Meanwhile, major interest rates changes are not expected in 2024 anymore – as the year went by, rate cuts have become less and less likely. That, in turn, causes that no-one is really interested in building inventories given the high borrowing costs.”

Base oils, also called lubricants, are used to produce finished lubes and greases for automobiles and other machinery.

The 14th International Summit with the South American Market 2024 runs in Rio de Janeiro on 2-3 July.