Global base oils margins outlook: Week of 3 March

·         Global base oils values extend rise vs feedstock/competing fuel prices, especially for brightstock.

·         Premiums get boost from lower feedstock costs.

·         Steady-to-higher base oils prices, even with lower feedstock costs, point to balanced-to-tight supply-demand fundamentals.

·         Firmer base oils margins and balanced-to-tight fundamentals incentivize refiners to raise production.

·         FOB Asia Group I/II base oils prices extend rise vs Singapore gasoil at time of year when margins typically rise.

·         Group I/II heavy-grade base oils premiums to Singapore gasoil rise to levels that are close to or exceed peak levels in 2024.

·         Already-high premiums could suggest there is more limited room for further upside.

·         Scenario is more feasible for Group I/II heavy neutrals, which have stayed more rangebound since Aug 2024.

·         Scenario could be less feasible for brightstock, whose premium has continued to trend higher.

·         Brightstock’s tight supply fundamentals and lack of an alternative product for now support ongoing price-strength.

·         China’s Group II N150 premium to Shandong diesel prices extends slide.

·         Premium mostly trends lower since end-Q3 2024.

·         Falling premium contrasts with typical rise in margins at start of new year as market fundamentals tighten ahead of spring oil-change season.

·         Falling premium suggests that fundamentals have avoided that kind of tightness.

·         CFR India Group II N70 premium to Singapore gasoil prices extends rebound to highest since end-Q3 2024.

·         Higher price premium, and strength of rebound in the premium, point to firmer supply-demand fundamentals.

·         Firmer premium boosts feasibility and attraction of moving more overseas shipments of very-light grade base oils to India.

·         Europe’s Group I brightstock premium to VGO extends sharp rebound to highest since Sept 2024, outpaces improving SN 150/SN 500 premiums.

·         Rebounding brightstock premium far exceeds year-earlier levels, contrasts with domestic SN 150/SN 500 values that outpace slightly year-earlier levels.

·         Sustained strength of brightstock premium highlights tight supply and structural difficulty to raise supply.

·         Smaller rise in SN 150/SN 500 premium to VGO suggests the structural supply-tightness is restricted to brightstock.

·         US domestic Group II base oils price premium to VGO holds firm in narrow range throughout Feb 2025.

·         Steady premium supports signs that margins have bottomed out after sustained slide since end-Q3 2024.

·         Steady premium contrasts with dip in heating oil premium to crude oil in late-Feb 2025, magnifying value of steadier base oils margins.

·         Even so, Group II N100 premium to VGO stays low compared with typical rise in values during spring oil-change period.