Global base oils margins outlook: Week of 21 Oct

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

·        Speed of recovery in margins differs in different markets.

·        Differing speed of recovery suggests recent steep drop in margins reflected more the surge in crude oil prices in Oct 2024 in some markets, and the combination of higher crude oil prices and weaker fundamentals in other markets.

·        FOB Asia base oils price premium to Singapore gasoil recovers.

·        Rebound in premium suggests recent weakness reflected more the surge in crude/gasoil prices in Oct 2024 than any major change in supply-demand fundamentals.

·        Group I/II heavy-grade premium to gasoil stays unusually firm, close to recent highs.

·        Group I light-grade premium to gasoil stays low and well below recent high in mid-Sept 2024.

·        Dynamic points to ongoing divergence in light and heavy-grade supply-demand fundamentals.

·        Domestic China Group II light-grade price premium to Shandong diesel price holds steadier, stays high relative to most of past year.

·        Firm premium incentivizes domestic refiners to maintain higher base oils output.

·        Incentive to maintain higher base oils output points to steady-to-firm domestic demand.

·        CFR India Group II N70 premium to Singapore gasoil price rebounds to highest since end-Sept 2024.

·        Rebounding premium suggests recent slide reflected more the surge in crude oil prices in Oct 2024.

·        Any extension of recovery would suggest supply-demand fundamentals remain firm.

·        Any pause in recovery at current level would point to weaker fundamentals compared with Aug 2024.

·        Domestic Europe Group I price premium to VGO steadies after sharp dip since H1 Sept 2024.

·        Domestic Group I premium to VGO stays relatively firm even after recent correction.

·        Domestic Europe Group I premium to VGO recovers more strongly than Group II premium.

·        Outperformance of Group I vs premium grades follows more muted fall in premium-grade premium since H1 Sept 2024.

·        Europe’s Group II base oils price premium to VGO recovers more strongly than US Group II premium to VGO.

·        Trend extends recent pattern of Europe Group II premium outperforming US Group II premium for more than two months.

·        US export Group II price premium to VGO steadies after sliding since late-Sept 2024.

·        Drop in premium since late-Sept 2024 begins earlier than in H2 2023, when premium began to fall from Nov 2023.

·        Slide in premium from Nov 2023 extended through to end-Q1 2024.

·        Repeat of that trend over coming months would depend on extend of disconnect between supply-demand fundamentals during that period.