Global base oils margins outlook: Week of 27 May

·        Global base oils prices extend rise vs feedstock/competing fuel prices, ICIS data shows

·        Firming premiums insinuate tight supply-demand fundamentals, incentivizing refiners to maintain or raise base oils output.

·        Prospect of steady or higher output would require steady or higher demand to absorb the supplies.

·        Fob Asia Group I and FOB NE Asia Group II price premium to Singapore gasoil prices extends sharp rise.

·        FOB NE Asia Group II N500 premium rises to highest since end-2021; N150 premium rises to highest in a year.

·        Rising premium coincides with weaker diesel premium to crude.

·        Diverging trends magnify attraction for refiners to produce more base oils.

·        Domestic China Group II N150 premium to Shandong diesel prices holds steady, stays in narrow range since end of last year.

·        Steady premium this year contrasts surge in premium in Q1 2023, followed by slump in premium in Q2 2023.

·        Steadier premium at lower levels this year points to margins that were sufficient to limit production at levels that avoided a large supply-build.

·        CFR India N70 premium to Singapore gasoil prices rises to highest in six months.

·        Rising N70 premium sustains incentive for regional refiners to boost output of very-light grades for base oils market rather than redirect supplies into diesel pool.

·        Europe’s Group I base oils export price premium to VGO extends strong rebound since early March 2024.

·        Europe’s Group II N150 premium to VGO holds close to highest in more than four months, stays in relatively narrow range over past year.

·        Europe Group III 4cSt (low) premium to VGO rises to highest in more than three months, after falling sharply over past year.

·        Europe Group III 4cSt (low) premium to VGO remains well above Group II N150 premium to VGO, especially compared with before Q3 2022.

·        US Group II domestic/export price premium to VGO extends strong rebound.

·        US Group II N100/120 export price premium to VGO rises close to six-month high; domestic price premium rises to highest in more than five months.

·        US Group III 4cSt premium to VGO rises to highest since early April, lags pace of rise in Group II N100/N120 premium.

·        Rebounding Group II premium to VGO, and rebounding premium at faster pace than Group III base oils, boosts incentive for refiners to increase Group II base oils output.