Global base oils margins outlook: Week of Feb 26

·        Global base oils prices mostly weaken vs feedstock/competing fuel prices, with Asia values holding steadier.

·        Weaker values in US/Europe incentivize run-cuts, especially to reduce surplus supply for export.

·        Fob Asia Group II heavy-grade premium to regional gasoil prices extends recovery to two-month high, stays below year-earlier levels.

·        Fob Asia Group I bright stock premium to gasoil rises to highest since H1 2023, similar to year-earlier levels.

·        Firm Fob Asia Group I SN 500/bright stock premium to gasoil cushions discount of SN 150 to gasoil.

·        Domestic China Group II light-grade price premium to Shandong diesel prices holds firm at highest since July 2023.

·        Steady-to-firm premium contrasts with surging light-grade premium the same time a year earlier.

·        Lack of any similar surge in the light-grade premium so far this year could lower prospect of sharp rise in supply. 

·        CFR India Group II N70 price premium to regional gasoil prices stays low even as it edges up from four-month low in H1 Feb 2024.

·        Premium stays close to levels that incentivize refiners to redirect supplies back into diesel pool.

·        Europe’s domestic Group I heavy-grade premium to VGO stays at lowest since at least Q1 2023; bright stock premium holds close to lowest in more than three years.

·        Low heavy-grade premium to feedstock prices incentivizes refiners to minimize output.

·        Europe Group III 4cst (low) premium to VGO extends fall to lowest since Q1 2022, adding to incentive for refiners to trim output.

·        US Group II light/heavy-grade export prices stay at discount to heating oil prices.

·        US Group II light-grade export price premium to VGO holds at lowest since H1 2020; N600 at lowest since Q3 2020.

·        Weak premiums incentivize refiners to cut production.

·        US Group II heavy-grade domestic premium to VGO holds at lowest since Q2 2022.

·        Domestic price-premium remains more than $600/t higher than heavy-grade export premium to VGO.

·        Firm domestic premium curbs incentive for refiners to cut production.

·        US Group II posted-price premium to VGO falls to lowest since Q3 2023, far below year-earlier levels.

·        Weaker premium incentivizes refiners to raise prices if fundamentals support such a move, or to cut production if fundamentals are weak.

·        Signs of some posted-price increases in past week likely to test whether fundamentals support such a move.