Global base oils margins outlook: Week of 14 April

·         Global base oils prices rise sharply vs feedstock/gasoil prices.

·         Price premiums climb at time of year when they typically rise strongly in response to firmer supply-demand fundamentals.

·         Rise in price premiums in April 2025 coincides with slump in crude oil prices.

·         Rise in price premiums in response to firm supply-demand fundamentals would raise prospect of outright prices holding firm.

·         Rise in price premiums more in response to slump in crude oil prices would raise prospect of growing disconnect between prices and supply-demand fundamentals.

·         FOB Asia base oils prices surge versus Singapore gasoil price.

·         FOB Asia Group I SN 500, brightstock premium to Singapore gasoil rise to highest since 2021.

·         Group II N500 premium rises to highest in more than three years.

·         Group II N150 premium rises to seven-month high.

·         Surging base oils premiums point to unusually tight supply and strong demand even with some plant maintenance drawing to a close.

·         China’s Group II N150 premium to Shandong diesel extends rise, while N500 holds steady at elevated level.

·         Relative strength of Group II light-grade prices vs Group II heavy grades since H2 Feb 2025 contrasts with ongoing strength of CFR India Group II heavy-grade prices vs light grades.

·         CFR India Group II N70 premium to Singapore gasoil surges close to highest since 2023.

·         Surging N70 premium points to increasingly strong demand for very-light grade base oils.

·         Surging N70 premium leaves wide open the arbitrage to move more shipments to India.

·         Surging N70 premium incentivizes overseas refiners to boost Group II base oils output.

·         Strong incentive to boost supply could compound size of any surplus volumes if demand fundamentals are weaker than surging N70 premium implies.

·         Europe’s Group I base oils prices rebound vs VGO prices, with brightstock premium climbing to highest since end-2022.

·         Rebounding base oils premiums mirror similar rise in premiums in Q2 2024, at time of year when supply-demand fundamentals often tighten.

·         Higher base oils premium this year outpaces year-earlier levels, pointing to even stronger fundamentals this year than last year.

·         Europe Group II light-grade price premium to VGO rebounds after recent dip.

·         Recent dip in Group II premium coincided with signs of healthy supply.

·         Reversal of that dip could reflect improvement in fundamentals or disconnect from fundamentals.

·         US Group II base oils premium to VGO jumps, breaking out of narrow range so far this year.

·         Surge in US Group II export price premium to VGO mirrors even larger rebound in price premium in Q2 2024.

·         Price premium rebounded in Q2 2024 following removal of surplus supplies in Q1 2024.

·         Surge in US export price premium to VGO in April 2025 could point to similar tightening of supply-demand fundamentals.

·         Any such tightening of supply-demand fundamentals would follow weaker-than-expected fundamentals until end-Q1 2025 even with round of plant maintenance.