Global base oils margins outlook: Week of 17 Feb

·         Global base oils prices hold firm vs feedstock/competing fuel prices, with export price differentials mostly much firmer than year-earlier levels.

·         Any extension of trend would point to margins bottoming out earlier this year than last year.

·         Any extension of trend would point to more muted pressure from surplus supply overhang at end-2024 and early-2025 compared with same time a year earlier.

·         FOB Asia base oils premium to Singapore gasoil holds firm after rebounding since mid-Jan 2025.

·         FOB Asia Group I brightstock premium edges even higher, extending sustained rise since Q3 2023.

·         FOB NE Asia Group II N500 premium to gasoil stays unusually high but holds in a narrower range since end-Q3 2024.

·         More range-bound Group II N500 premium contrasts with still-rising Group I brightstock premium.

·         China’s domestic Group II N150 premium to Shandong diesel prices extends gradual fall, contrasting with much firmer premium the same time a year earlier.

·         Premium falls at time of year when demand typically gets seasonal boost, supporting firmer market fundamentals.

·         Weaker premium suggests any seasonal boost is more muted this time.

·         CFR India Group II N70 premium to Singapore gasoil price extends recovery to highest in more than two months.

·         Rebounding premium reflects combination of lower gasoil price and rising outright N70 price.

·         Rebounding premium points to firm underlying demand fundamentals.

·         Rebounding premium facilitates arbitrage to move more supplies to India.

·         Europe’s Group I/II light-grade base oil premium to VGO holds steadier, contrasts with further fall in Group III 4cSt premium to VGO.

·         Europe Group III 4cSt premium to VGO falls to lowest since mid-2020, dips below Group II premium to VGO for first time since mid-2021.

·         Ongoing fall in Group III premium to VGO points to weaker supply-demand fundamentals vs Group I and Group II base oils.

·         US domestic Group II light-grade premium to VGO holds steady since mid-Jan 2025 after sustained slide since Sept 2024.

·         US Group III 4cSt premium to VGO also holds steady since mid-Jan 2025 after sustained slide since end-2022.

·         More stable price premiums could point to price differentials bottoming out.

·         More stable Group II and Group III price premiums contrasts with Europe, where Group III differentials continue to weaken.

·         Diverging trends point to weaker Group III fundamentals in Europe than in US.