Global base oils margins outlook: Week of 22 September

·         Global base oils margins mostly hold at levels that sustain incentive for refiners to maintain high output.

·         Incentive for refiners to maintain high output puts pressure on global demand to remain sufficiently firm to absorb steady-to-higher supply.

·         Pressure on demand to hold firm coincides with time of year when demand typically starts to ease.

·         Any such demand weakness, combined with firm margins and high output, could speed up pick-up in surplus supply.

·         FOB Asia base oils prices hold firm in narrow range vs Singapore gasoil.

·         Firm base oils price-differentials incentivize refiners to maintain or raise output.

·         Sustained strength of base oils margins suggest that supply-demand fundamentals remain tight even with incentive to raise output.

·         Sustained strength of base oils margins, even after completion of plant-maintenance work, suggests that supply is structurally tight.

·         Sustained strength of base oils price-differentials could alternatively point to moves by refiners to manage output carefully despite the firm margins.

·         Sustained strength of base oils margins could face pressure in response to any marked rise in supply or fall in demand.

·         China’s domestic Group II N150 price-premium to Shandong diesel prices holds in narrow range for third week.

·         N150 price-premium remains elevated after strong rebound since mid-June 2025, incentivizing refiners to maintain higher base oils output.

·         Incentive to maintain higher base oils output through Q3 2025 coincides with seasonal rise in demand.

·         Ongoing pause in rise in N150 price-differential could point change in supply-demand fundamentals that supported its strong rebound.

·         China's domestic Group II N150 price-premium to diesel also rose strongly in Q3 2024, before beginning extended slide from end-Sept 2024.

·         CFR India Group II N70 price-premium to Singapore gasoil edges up, holds firm.

·         Price-premium holds at level that facilitates arbitrage flows from Asia to India and incentivizes overseas refiners to maintain or raise very-light-grade base oils output.

·         Price-premium that facilitates the shipment of more supply to India points to demand that remains sufficiently firm to absorb the supply.

·         Europe’s domestic Group I SN 150 price-premium to vacuum gasoil (VGO) extends fall to lowest since Feb 2025, and well below year-earlier levels.

·         Typical downward pressure on margins during final months of the year raise prospect of SN 150 margins extending their fall.

·         Any extension of fall would leave SN 150 margins increasingly close to levels that they bottomed out at several times since Q2 2023.

·         Any break in margins below those levels could point to change in supply-demand fundamentals vs previous years.

·         Increasingly weak SN 150 margins contrast with still-unusually-firm brightstock margins and relatively firm heavy-neutrals margins.

·         Firm heavy-grade margins could incentivize refiners to maintain steady or higher output.

·         Any such moves could add to light-grade supply, sustaining downward pressure on margins.

·         US Group II domestic heavy-grade price-premium to VGO extends fall to lowest since Q1 2021.

·         Price-premium extends fall that began in H1 2023.

·         Sustained fall in domestic price-premium contrasts with more rangebound Group II heavy-grade export-price premium to VGO.

·         Sustained pressure on domestic heavy-grade margins points to persistent surplus-supply.

·         Sustained pressure on domestic heavy-grade margins points to price differentials that remain at levels that incentivize refiners to maintain high output.

·         Steadier export heavy-grade margins, despite persistent domestic  surplus, points to sufficiently-firm overseas demand to absorb the supplies.