Global base oils margins outlook: Week of 15 July

·        Global base oils prices hold steadier versus feedstock/competing fuel prices following recent dip in margins, especially in Asia.

·        Base oils margins remain relatively firm even after recent rise in crude prices since early June, especially for US Group II and Europe Group I supplies, and for Asia Group II heavy grades.

·        Relatively firm margins likely to incentivize refiners to maintain or raise output.

·        FOB NE Asia Group II base oils price premium to regional gasoil prices edges up, halting sharp slide over past month.

·        Group II heavy-grade premium especially remains much higher than year-earlier levels.

·        Firmer premiums could incentivize refiners to maintain output, especially of heavy grades.

·        FOB Asia Group I base oils premium to regional gasoil prices stays relatively firm even after falling over past month, and stays well above year-earlier levels.

·        Firm Group I premiums point to more balanced supply-demand fundamentals, incentivize refiners to maintain higher output.

·        China’s domestic Group II N150 price premium to Shandong diesel prices holds steady, edging up slightly since early June 2024.  

·        Steady-to-firm premium contrasts with sharp fall in FOB NE Asia Group II premium since early June 2024.

·        Contrasting trends point to more balanced supply-demand fundamentals in China than in Asia.

·        CFR India N70 premium to Singapore gasoil price edges up after slumping over past month.

·        Premium stays at level that reduces attraction of moving more supplies from Asia to India unless regional refiners trim their price offers.

·        Any slowdown in demand or pressure on refiners to lower offers would boost their incentive to produce more diesel instead.

·        Europe’s Group I price premium to VGO extends recovery since end-June 2024, stays close to highest this year, especially for export prices, even after rebound in crude/VGO prices since early June.

·        Firm premium incentivizes refiners to maintain or raise output.

·        Europe’s Group II price premium to VGO recovers from two-month low in early July 2024, stays in relatively narrow range since start of the year.

·        Europe Group II light-grade price premium’s relatively narrow range this year contrasts with rebound in US light-grade premium to VGO since start of Q2 2024.

·        Like Europe, US Group II base oils premium to VGO edges down much less sharply than FOB NE Asia values over past month.

·        US Group II domestic light-grade premium to VGO holds firm, similar to year-earlier levels.

·        US Group II export light-grade premium to VGO holds firm, well above year-earlier levels.

·        Firmer export price-premium adds to incentive for refiners to maintain or raise output.