Global base oils margins outlook: Week of March 18

·        Base oils prices face growing pressure from feedstock/competing fuel prices after crude oil prices rise to highest in more than four months.

·        Refiners face more pressure to raise prices to limit downward pressure on margins, especially in US and Europe.

·        Fob Asia Group I base oils prices hold firm relative to regional gasoil prices, maintaining similar or higher levels than in recent months.

·        Fob Asia Group I base oils price premium to gasoil maintains similar levels to March 2023, after the premium rebounded from much lower levels earlier that year.

·        Firm premium incentivizes Group I refiners to maintain or increase base oils output.

·        Fob Asia Group II base oil price premium to gasoil prices holds firm after recovering from dip in first few weeks of 2024.

·        Fob Asia Group II base oil premium to gasoil lags year-earlier levels, when margins surged through to early May 2023.

·        Lagging premium curbs incentive for refiners to maximise output.

·        Domestic Chinese Group II light-grade premium to Shandong diesel prices extends slide to three-month low.

·        Falling premium contrasts with surge in Group II premium in first four months of 2023.

·        Lower premium cuts incentive for domestic refiners to raise output at a time of year when domestic demand typically rises.

·        CFR India N70 premium to Asia gasoil prices holds steady at levels that sustain incentive for overseas refiners to maintain production levels but that increasingly lag year-earlier levels.

·        Europe’s Group I base oil price premium to feedstock/competing fuel prices holds in narrow range, up from lows in early Feb 2024, down from year-earlier levels, curbing incentive to boost output.

·        Europe’s Group II base oil premium to VGO holds steady, well below highs in Jan 2024 and down from year-earlier levels.

·        Premium stays lower even with ongoing Group II plant maintenance in Europe.

·        Europe’s Group III 4cst (low) premium to VGO steadies in recent weeks close to lowest since Q2 2022.

·        US Group II light/heavy-grade export prices fall to steeper discount to heating oil prices.

·        US Group II light-grade export price premium to VGO holds close to lowest since early 2020; heavy-grade premium holds close to lowest since July 2020.

·        US Group II light-grade domestic price premium to VGO holds close to lowest since Q1 2022; heavy-grade premium holds close to lowest since Q2 2022.

·        Weak base oil premiums incentivize refiners to trim run-rates or raise prices.

·        US Group II light-grade posted price premium to VGO down more than $80/t since early December, even with steady posted prices in interim.

·        Light-grade posted price premium to VGO holds well below average levels in 2023, adding to pressure on margins.

·        Last week’s rise in crude oil prices adds to pressure on margins and on US refiners to raise posted prices.