· Global base oils values mostly stay high relative to feedstock/competing fuel prices even with recent drop in price differentials.
· Firm margins suggest supply-demand fundamentals stay tight, incentivize refiners to maintain high output levels.
· Any disconnect between actual supply-demand fundamentals and price signals pointing to firm fundamentals could compound any mismatch between supply and demand.
· FOB Asia Group I/II light/heavy-grade base oils premium to Singapore gasoil price stays elevated even as it extends drop since mid-Sept 2024.
· FOB NE Asia Group I/II heavy-grade premium to gasoil holds close to highest since Q4 2021.
· FOB Asia light-grade base oils values also stay firm even as they increasingly lag strength of heavy grades.
· Firm light and especially heavy-grade values point to tight supply-demand fundamentals, incentivize refiners to maximise base oils output.
· China’s domestic Group II N150 premium to domestic diesel prices extends rise to highest in more than a year.
· China’s domestic Group II heavy-neutrals and Group I light/heavy neutrals prices also extend strong rise vs diesel.
· Sustained rise in price margins points to tight supply-demand fundamentals, incentivizing domestic refiners to boost output.
· Domestic Group I refiners will have difficulty to respond accordingly because of upcoming closure of major Group I unit in the country in Oct 2024.
· CFR India N70 premium to Singapore gasoil price extends fall to lowest in more than two months.
· Premium stays at level that keeps arbitrage to India feasible and incentivizes refiners to direct very-light grades into base oils rather than diesel pool.
· Europe’s domestic Group I price premium to VGO falls sharply, contrasting with steadier Group II/III premium to VGO.
· Any extension of that trend could point to structural change in supply-demand fundamentals for Group I and premium-grade base oils.
· Europe Group II light-grade premium to VGO further outpaces equivalent US Group II premium, adding to signs of relative strength of Europe Group II prices.
· US Group II export light-grade price premium to VGO extends fall to lowest in more than two months.
· Premium stays unusually high vs typical levels, especially in view of weakness of diesel premium to crude.
· Firm price levels sustain incentive for refiners to produce more light grades, provide refiners with more room to adjust prices and still maintain firm margins.
