Global base oils margins outlook: Week of March 11

·        Global base oils prices mostly hold steadier vs feedstock/competing fuel prices.

·        Weak export price premium to feedstock/competing fuel prices in US and Europe incentivizes refiners to cut run-rates.

·        Relatively firm domestic price premium in US could deter such moves; relatively weak domestic price premium in Europe could add to such moves.

·        Fob Asia base oils values hold firm vs regional gasoil prices.

·        Fob Asia base oils premium to gasoil prices stayed well above year-earlier levels in first two months of 2024, reflecting more limited surplus at start of the year.

·        Fob Asia base oils premium to gasoil prices starts to lag year-earlier levels in March 2024.

·        Firm but not surging base oils premium incentivizes refiners to continue to manage output carefully.

·        China’s domestic Group II light-grade premium to Shandong diesel prices extends fall that began in late-Feb 2024.

·        Falling base oils values contrast with rising premium through most of March-April 2023.

·        Falling premium cuts incentive for domestic refiners to raise output.

·        CFR India N70 premium to regional gasoil prices holds at levels that allow refiners to continue to offer surplus supplies on fob Asia basis at steady premium to diesel prices.

·        Europe’s Group I export prices rise vs gasoil/VGO prices, mostly stay well below year-earlier levels.

·        Weak export prices vs gasoil/VGO incentivize refiners to trim surplus supplies.

·        Europe’s Group I domestic prices hold steady vs VGO, close to year-earlier levels.

·        Europe’s Group II domestic prices edge up vs VGO, stay well below year-earlier levels.

·        Europe’s Group II prices stay lower vs VGO even with regional plant maintenance work.

·        Steady Group II premium to VGO points to relatively balanced supply-demand fundamentals even with plant maintenance work.

·        US Group II export prices maintain discount to heating oil.

·        US Group II export light-grade price premium to VGO falls to lowest since 2018; N600 premium edges up, holds close to lowest since mid-2020.

·        Weak margins incentivize refiners to produce more diesel instead.

·        US Group II domestic heavy-grade price premium to VGO holds close to lowest since June 2022, stays well above pre-2021 levels.

·        US Group II light-grade posted price premium to VGO edges up, stays close to lowest since Sep 2023.