Global base oils margins outlook: Week of 29 July

·        Global base oils prices mostly extend rise vs feedstock/competing fuel prices, contrasting with sliding premium to VGO/diesel the same time last year.

·        Rising base oils values points to firmer supply-demand fundamentals, incentivizing refiners to raise base oils output.

·        Asia’s Group I/II heavy-grade base oils prices extend rise vs regional gasoil prices.

·        Asia’s Group I/II light-grade base oils prices hold steadier vs gasoil prices but remain well above year-earlier levels.

·        Heavy-grade base oils values show signs of getting additional support from firm fundamentals.

·        China’s domestic Group II light-grade base oil premium to Shandong diesel prices stays in narrow range for more than a month, and well above year-earlier levels.

·        China’s domestic Group II heavy-grade premium to Shandong diesel prices extends rise to highest in more than two years.

·        China’s domestic Group I light/heavy-neutrals price premium to Shandong diesel prices extends rise.

·        Steady-to-firm premiums to diesel incentivize refiners to maintain or raise output.

·        CFR India N70 premium to Singapore gasoil prices extend recovery to highest in more than a month, hold well above year-earlier levels.

·        Rising premium sustains feasibility of moving more very-light grade base oils to India.

·        Rising premium sustains incentive for refiners to produce and offer more very-light grades rather than divert the supplies into the diesel pool.

·        Europe’s base oils prices extend rise vs VGO, incentivizing Group I and Group II producers especially to raise output.

·        Base oils premium holds firm vs year-earlier levels, when premiums to VGO fell in Aug-Sep 2023.

·        Strength of premium gets further boost from relative weakness of gasoil premium to crude oil.

·        US Group II light-grade price premium to VGO rises above Europe Group II premium to VGO for first time this year.

·        US Group II light-grade price premium to VGO extends rise to highest since Nov 2023, contrasts with sliding premium the same time a year earlier.

·        Ongoing rise in US Group II premium to VGO, and faster rise in US Group II premium vs other regions, reflects ongoing concerns about supply-disruptions over coming months, supporting firmer demand that is adding to tighter surplus availability of supply.