Global base oils margins outlook: Week of 22 July

·        Global base oils values recover versus feedstock/competing fuel prices.

·        Margins stay firm in all regions, especially compared with last year, and especially in US.

·        Firm margins imply strong supply-demand fundamentals, incentivize refiners to raise base oils output.

·        FOB Asia base oils prices rise vs feedstock/competing fuel prices, stay unusually firm for the time of year.

·        Rise in FOB Asia Group I and Group II base oils price premium contrasts with slump in premium from June-Sept 2023.

·        Firmer-than-usual base oils premium coincides with lower gasoil premium to crude oil compared with 2023 and especially with 2022 levels.

·        Firmer-than-usual base oils premium and lower gasoil premium magnifies strength of base oils premium, incentivizing refiners to maintain or raise output.

·        China’s domestic Group II base oils prices hold firm vs Shandong diesel prices.

·        Steady values contrast with sharp dip in Group II premium to diesel in Q3 2023.

·        Premium holds steady in Q3 2024 even with seasonal slowdown in domestic demand.

·        Steady premium incentivizes refiners to maintain steady or higher output levels even with slowdown in domestic demand.

·        CFR India Group II N70 premium to Singapore gasoil prices extends recovery to highest in a month.

·        Firmer premium boosts incentive to move more Group II light grades to India, cuts pressure on Asia refiners to trim price offers.

·        Europe’s domestic Group I base oils price premium to VGO holds close to highest in a year.

·        Europe’s Group I export price premium to VGO extends rise to highest since end-2022.

·        Premiums hold firm at a time of year when demand faces a seasonal slowdown.

·        Firm premium points to unusually tight supply and steady-to-firm demand, incentivizing refiners to maintain or raise output.

·        Firm premium raises prospect of build-up of surplus volumes if supply is less tight or demand weaker than expected.

·        Europe’s Group II price premium to VGO edges up close to highest since start of 2024.

·        Group II premium stays low vs 2021-2022 levels, stays firm vs levels before 2021.

·        Rise in US, Europe Group II domestic light-grade price premium to VGO outpaces higher ex-tank Singapore Group II premium to gasoil.

·        US Group II premium to VGO almost matches Europe Group II premium to VGO.

·        Trend highlights strong rebound in US Group II premium to VGO since end-Q1 2024, cuts attraction of moving more shipments to Europe.

·        Increasingly firm US Group II premium to VGO incentivizes refiners to maximise base oils output.

·        Weaker heating oil premium to crude oil adds to attraction of producing more base oils.

·        US Group III 4cSt premium to VGO holds in relatively narrow, firmer range after bottoming out in April 2024 at lowest since early-2021.

·        Premium remains well above levels before 2021.