Global base oils margins outlook: Week of 17 March

·         Global base oils values rise vs feedstock/competing fuel prices.

·         Firmer base oils values contrast with lower gasoil premium to crude oil, magnifying impact of rising base oils premium.

·         Rising base oils premium points to firm supply-demand fundamentals, especially in Europe and Asia.

·         Asia’s light/heavy-grade base oils prices extend rise vs Singapore gasoil to increasingly firm levels.

·         Increasingly firm margins incentivize refiners to boost output.

·         Sustained strength of heavy-grade margins suggests supply stays tight even with incentive to raise output, while demand holds firm.

·         Margins could face pressure from any improvement in supply or weaker demand.

·         Any such signs of weaker fundamentals, combined with still-firm margins, could speed up pick-up in surplus supply.

·         China’s domestic Group II N150 premium to Shandong diesel price extends recovery to highest since end-Jan 2025.

·         Firmer Group II N150 premium points to steadier supply-demand fundamentals, coincides with maintenance work on key base oils unit in China.

·         CFR India Group II N70 premium to Singapore gasoil steadies, holding close to highest since Q3 2024.

·         Firm N70 premium facilitates arbitrage, boosts attraction for overseas refiners to offer more very-light-grade base oils for export.

·         Firm N70 premium coincides with weaker gasoil premium to  crude oil, adding to attraction of producing and selling more very-light-grade base oils.

·         Europe’s Group II base oils premium to vacuum gasoil (VGO) extends rise, with light-grade premium climbing to highest since end-Oct 2024.

·         Europe Group II margins rise at faster pace than Group I and Group III base oils.

·         Rebounding Group II margins point to firm supply-demand fundamentals, incentivizing refiners to boost output or move more supplies to Europe.

·         US Group II domestic light-grade premium to VGO rises to highest since Nov 2024, outpacing steadier export-price premium to VGO.

·         US Group II base oils margins hold well above year-earlier levels, pointing to firmer supply-demand fundamentals so far this year.

·         US Group II margins lag stronger rebound in Europe and Asia.

·         Dynamic points to weaker supply-demand fundamentals in US than in Europe and Asia.