Global base oils margins outlook: Week of 24 June

·        Global base oils values extend fall versus feedstock/competing fuel prices, especially in Asia.

·        Even with recent correction, base oils margins hold at levels that sustain incentive for refiners to maintain firm output levels.

·        FOB Asia base oils prices extend sharp slide vs feedstock/competing fuel prices amid lower outright prices, higher gasoil prices.

·        FOB NE Asia Group II price premium to Singapore gasoil prices falls to lowest in more than two months.

·        Price premium remains relatively firm, but is starting to mirror similar slide in Group II price premium in Q2-Q3 2023, that only bottomed out in Aug 2023.

·        FOB Asia Group I premium to gasoil holds relatively firm even after recent slide, and also starts to mirror similar trend the same time a year ago.

·        China’s domestic Group II N150 base oils price premium to Shandong diesel prices edges up, stays in narrow range since end-2023.

·        Steady price premium contrasts with sliding FOB Asia base oils price premium to gasoil prices.

·        Steadier price premium could point to more balanced fundamentals compared with regional market.

·        CFR India Group II N70 premium to Singapore gasoil prices extends sharp slide for second week to lowest since H2 Feb 2024.

·        Sliding premium starts to mirror similar trend in Q2-Q3 2023, when differential flipped to discount to gasoil.

·        Speed of fall in N70 premium to gasoil could prompt refiners to consider adjusting output levels of very-light grade base oils.

·        Europe’s Group I light-/heavy-neutrals base oils price premium to VGO falls to one-month low, lags the steeper fall in Group II/III price premium to VGO since early June 2024.

·        Still-firm Group I price premium, and smaller drop in premium vs Group II/III base oils, points to ongoing strength of Group I supply-demand fundamentals.

·        US Group II base oils values stay high vs VGO/heating oil prices even as they slip to lowest in a month.

·        Firm premium sustains incentive for refiners to maintain or raise base oils output.

·        Firm premium contrasts with US Group III 4cSt whose premium to VGO slips close to lowest since early 2021.