Global base oils arb outlook: Week of 14 April

·         US base oils export price discount to Asia base oils prices stays wide so far this year.

·         Wide price discount facilitates shipment of surplus supplies to markets like India.

·         US base oils and lube exports to India surge in Feb 2025, reflecting that dynamic.

·         Those kinds of arbitrage shipments could face growing complications in coming months in face of unusually extreme crude oil price volatility.

·         Any slowdown in such arbitrage shipments could complicate removal of surplus supplies from US market.

·         Any such slowdown in arbitrage shipments would have fewer repercussions for markets like India.

·         CFR India Group II N500 price premium to US export price widens since Q4 2024.

·         Widening premium coincides with crude oil/gasoil prices holding in relatively narrow range from then until late-Q1 2025.

·         Rangebound crude oil/gasoil prices leave supply-demand fundamentals the key factors influencing base oils prices.

·         Rangebound crude oil/gasoil prices duly facilitate shipments involving extended time period between procurement and delivery of the supplies.

·         Wide CFR India Group II price premium to US export prices this year coincides with heavy round of plant maintenance work in Asia and peak-demand period in India.

·         Rise in US arbitrage shipments to India helps to cushion impact of plant maintenance work, enable blenders to replenish depleted stocks in early Q2 2025.

·         India’s buying interest in supplies from US could now start to wane in face of weaker fundamentals.

·         Unusually volatile crude/gasoil prices in April 2025 could magnify slowdown in demand.  

·         India’s lube demand typically falls in Q2 from Q1, curbing urgency to replenish stocks.

·         Swathe of plant maintenance work in Asia set to end in April-May 2025, boosting regional supply.

·         Prospect of weaker supply-demand fundamentals coincides with slump in crude oil and oil products prices in April 2025.

·         Weaker fundamentals curb need for buyers in India to line up additional arbitrage shipments from more distant markets.

·         Volatile crude/gasoil prices magnify risk of locking in prices for shipments with extended time gap between procurement and delivery of the supplies.

·         Any slowdown in Asia demand for surplus supplies from US increases that market’s reliance on domestic demand and on logistically-closer outlets like Mexico.

·         US domestic demand was weaker than usual so far this year even before this month's imposition of tariffs on global imports.

·         Growing reliance on Mexico exposes any surplus supplies to risk of additional tariff-related complications and to pressure from lower heating oil prices.

·         Persistent need to line up outlets for surplus US base oils supply was already challenging.

·         Tariffs and volatile crude oil prices magnify the challenge.