Global base oils margins outlook: Week of 20 May

·        Global base oils prices edge higher vs feedstock/competing fuel prices, ICIS data shows.

·        Increasingly firm base oils premium to feedstock/diesel prices contrasts with weak diesel premium to crude.

·        Contrasting trends add to incentive for refiners to produce more base oils.

·        FOB NE Asia Group II N150/N500 price premium to Singapore gasoil prices extend rise to highest since Q2 2023.

·        Rising premium incentivizes refiners to maximise base oils output.

·        FOB NE Asia Group II N150/N500 premium to gasoil similarly rose from March to May 2023, before beginning sharp fall from mid-May 2023.

·        FOB Asia Group I brightstock premium to gasoil extends rise to highest since end-2021.

·        Sustained strength of brightstock premium especially reflects structurally tighter supply, complicating refiners’ ability to raise output.

·        China’s domestic Group II N150 premium to Shandong diesel prices edges lower, holding in narrow range since end-Dec 2023.

·        Steady premium shows signs of providing sufficient incentive for domestic refiners to maintain steady output.

·        China’s domestic premium for imported Group II N150 over Shandong diesel prices rises to highest since before 2023.

·        Disconnect vs premium for domestic supplies points to tighter availability of imported supplies.

·        Disconnect reflects option for overseas refiners to move shipments to other markets where prices are higher, and more limited options for domestic refiners in China to do the same.

·        CFR India N70 premium to Singapore gasoil prices edges lower, stays close to highest since Q4 2023.

·        Firm premium incentivizes Asia’s refiners to maintain or raise base oils output rather than redirect feedstock or very-light grade supplies into the diesel pool.

·        Europe’s domestic Group I prices, and especially brightstock, extend rise vs VGO.

·        Domestic brightstock premium to VGO rises to highest since Jan 2024.

·        Rising premium incentivizes refiners to boost output of the heavy-grade product.

·        Europe’s Group III 4cSt premium to VGO extends recovery, shows signs of bottoming out for now after sustained slide since Q2 2023.

·        US domestic Group II light-grade premium to VGO holds at highest since early-Jan 2024.

·        Rebound in Group II light-grade premium to VGO outpaces heavy grades, export supplies and Group III base oils over past month.

·        US Group III 4cSt premium to VGO recovers over past month, stays close to lowest since Q1 2021.

·        US Group II light-grade posted price premium to VGO rises to six-month high; US Group III posted price premium to VGO holds close to lowest since Q2 2022.