Global base oils margins outlook: Week of 28 April

·         Global base oils price premium to feedstock/competing fuel prices stays higher at end-April 2025 than a month earlier.

·         Higher margins coincide with seasonal rise in demand and plant maintenance work.

·         Higher margins follow sharp fall in crude oil prices.

·         Higher margins point to fundamentals that are firm enough to outweigh pressure from lower crude oil prices.

·         Higher margins also incentivize refiners to raise or maintain high output levels.

·         High margins and firm output would require that demand stays strong to absorb any pick-up in supplies.

·         Asia’s base oils prices hold firm vs Singapore gasoil prices.

·         Ongoing strength of Group I/II margins suggests supply-demand fundamentals remain firm.

·         Ongoing strength of base oils margins incentivizes refiners to maintain high output levels.

·         Any moves to maintain high output would speed up build-up of surplus supplies if fundamentals were to weaken.

·         Supply-demand fundamentals face prospect of weakening by end-Q2 2025 once heavy round of plant maintenance draws to a close.

·         China’s domestic Group I/II base oils prices mostly extend rise vs Shandong diesel prices.

·         China’s Group II light-grade price premium to Shandong diesel extends rise but lags levels in Jan-April 2024.

·         Price premium stays relatively weak vs year-earlier levels even with round of plant maintenance in China and seasonal rise in demand.

·         Lower price premium could point to balanced-to-weak fundamentals even with seasonal boost and drop in output.

·         CFR India Group II N70 premium to Singapore gasoil holds steady at high level.

·         High N70 premium facilitates arbitrage to move shipments to India, incentivizes Asia refiners to boost output of very-light grade base oils.

·         Sustained strength of N70 premium for past two months suggests any pick-up in supply so far remains insufficient to outpace demand.

·         Dynamic raises prospect of N70 premium extending its current price strength.

·         Europe’s Group II base oils price premium to VGO holds firm, close to highest since Oct-Nov 2024.

·         Group II premium to VGO rises more strongly than domestic Group I base oils premium in April 2025.

·         Rising Group II premium and more rapid rise in premium points to firm fundamentals vs Group I base oils.

·         Firmer Group II premium could incentivize moves to support higher regional output and to move more supplies from other regions to Europe.

·         Firm Group II premium coincides with signs of healthy availability of supply and cautious demand.

·         US Group II base oils export price premium to VGO holds onto most of its strong gains in April 2025.

·         Group II premium remains well above year-earlier levels even without repeat of surge in margins from March 2024 that followed slump in margins in Jan-Feb 2024.

·         Firmer and more range-bound margins so far this year compared with last year suggests any supply-build remains more manageable and fundamentals more balanced.

·         Any extension of more balanced fundamentals could continue to support margins at firmer and more rangebound levels.

·         More rangebound margins would avoid repeat of surge in export margins that US market faced in Q2-Q3 2024.