Global base oils margins outlook: Week of 16 Dec

·         Global base oils prices hold relatively steady/firm vs feedstock/competing prices, especially for time of year.

·         Steadier margins point to supply-demand fundamentals that are more balanced than usual for time of year.

·         Steadier margins curb pressure on refiners to cut output, increase risk of supply-build in early 2025.

·         FOB Asia Group I/II base oils price premium to Singapore gasoil holds unusually steady and firm for time of year.

·         FOB Asia Group I brightstock, Group II N500 premium to Singapore gasoil stays unusually high after sustained rise throughout the year.

·         Sustained upward trend of price premium points to persistent supply-tightness even with incentive for refiners to maximise output.

·         Domestic China Group II N500 premium to Shandong diesel prices rises to highest in more than three years.

·         Sustained rise in N500 premium contrasts with falling domestic Group II N150 premium to Shandong diesel.

·         Sustained N500 price strength at elevated level points to still-insufficient supply even with incentive for refiners to maximise output.

·         Ongoing fall in domestic N150 premium contrasts with rebound in premium around this time a year ago.

·         CFR India Group II N70 premium to Singapore gasoil stays in narrow range it held in since end-Sept 2024.

·         Steady premium through Q4 2024 contrasts with volatility of price premium in Q4 2023.

·         Steady premium points to more balanced supply-demand fundamentals, with prices at levels that incentivize sufficient supply from overseas refiners and demand from domestic buyers.

·         Europe’s Group III 4cSt (low) premium to VGO extends fall to lowest since Q1 2021.

·         Falling Group III premium contrasts with steady Group II N150 premium to VGO.

·         Steady Group II N150 premium to VGO contrasts with weaker US domestic Group II N100/120 premium to VGO.

·         Relative strength of Europe Group II light-grade prices vs other grades and vs other regions could attract more supply to the region, boost demand for other grades in the region.

·         US Group II export price premium to VGO holds steady through most of Q4 2024 after falling in late-Q3 2024.

·         Steadier premium contrasts with surge, then slump in Group II premium during same period last year.

·         Last year’s Group II premium extended slide through most of Q1 2024 before recovering.

·         Steadier premium in Q4 2024 could point to more balanced supply-demand fundamentals vs same time last year.

·         Steadier premium curbs pressure on refiners to cut output at a time when demand faces seasonal slowdown, raising prospect of build-up of surplus supply.