Global base oils arb outlook: Week of 28 April

·         US domestic Group I brightstock price outperforms lighter grades and Group II prices.

·         US export brightstock prices significantly lag brightstock prices in Europe and Asia.

·         Widening price-discount reflects signs of increasingly diverging supply-demand fundamentals between US and Europe and Asia.

·         Europe’s brightstock price rises to unusually high premium to other Group I grades and to VGO over past year.

·         Elevated price keeps shut the arbitrage from Europe to markets like India and southeast Asia.

·         Europe’s brightstock price-strength reflects increasingly tight supply that lags demand.

·         Last year’s closure of a Group I plant in Italy, combined with plant maintenance in the country in Q1 2025, compounds Europe’s tight supply.

·         Italy’s base oils output falls in Feb 2025 to second-lowest level since H1 2023, reflecting that dynamic. 

·         Asia’s export Group I brightstock price surges vs other Group I grades and vs Singapore gasoil over past year.

·         Elevated brightstock price keeps shut the arbitrage to outlets like Middle East.

·         Asia’s brightstock price-strength reflects increasingly tight supply following plant closures in Japan and China in recent years.

·         Slump in Japan’s base exports gathers pace from H2 2023, reflecting drop in supply.

·         US brightstock price rises vs other Group I grades and vs VGO even without any Group I plant closures in the country.

·         US brightstock price instead shows signs of getting support from tight supply in other markets.

·         US brightstock price discount to domestic Europe price grows to widest level since end-2022.

·         US brightstock price premium to FOB Asia cargo price falls in April 2025 to lowest level in more than four years.

·         Weaker US brightstock price facilitates arbitrage opportunities to move shipments to markets like Europe, Africa and India.

·         Weaker price levels and more frequent arbitrage shipments point to persistent surplus volumes in US market.

·         US base oils exports from district of Philadelphia trend higher from 2022, contrasting with lower supplies in Japan and Europe.

·         Higher export volumes could reflect incentive for refiners to boost brightstock production in response to higher prices and tighter supply in other markets.

·         Higher export volumes could also reflect weaker US demand.

·         Either way, prices point to growing contrast between brightstock fundamentals in US and fundamentals in Europe and Asia.