Global base oils margins outlook: Week of 2 Dec

·        Global base oils prices mostly stay relatively steady vs feedstock/competing fuel prices.

·        Rangebound premiums contrast with sharp fall in margins during final weeks of 2023.

·        Diverging margins trends vs last year point to different supply-demand fundamentals vs same period last year.

·        Any extension of trend would point to less pressure from oversupply at year-end this year than last year. 

·        FOB Asia base oils price premium to Singapore gasoil holds steady at firm levels, especially for heavy grades and for brightstock.

·        FOB Asia brightstock premium to gasoil extends rise to highest in more than three years.

·        Rising brightstock premium incentivizes refiners to maximise output of the product.

·        Sustained strength of premium points to ongoing supply-tightness, suggesting insufficient regional production capacity.

·        China’s domestic Group II N150 premium to Shandong diesel prices steadies, holding in relatively narrow range since April 2024.

·        Steady premium contrasts with steep fall in premium this time a year ago, at a time when seasonal slowdown in demand typically puts pressure on prices.

·        Steady premium this time points to more balanced fundamentals than usual for time of year.

·        Steady premium coincides with dip in China’s Group II base oils output because of plant shutdown.

·        CFR India Group II N70 premium to Singapore gasoil price holds steady in narrow range.

·        Steady premium in narrow range mirrors similar trend for China’s Group II light-grade prices, contrasts with more volatile premium in 2023, including end-2023.

·        Steady premium holds at levels that keeps arbitrage to India open and continues to incentivize overseas refiners to direct very-light grade base oils into base oils rather than diesel pool.

·        Europe Group I export base oils price premium to VGO falls to lowest since Q2 2024.

·        Group I export price premium falls at time of year when it often faces downward pressure in response to weaker supply-demand fundamentals.

·        Europe’s Group I export premium fell more steeply to much lower levels in final weeks of 2023 and in early 2024.

·        Repeat of that trend in coming weeks would point to similarly-weak supply-demand fundamentals at year-end.

·        More muted pressure on price premium would by contrast point to less surplus supply vs year-earlier levels.

·        US Group II export-price premium to VGO steadies.

·        Steadier heavy-grade premium in Nov 2024 contrasts with sharp slump in premium from Oct 2023 to March 2024.

·        Any extension of this year’s trend, and the avoidance of last year’s sharp slump, would point to more balanced supply-demand fundamentals during final weeks of this year vs same period last year.