Global base oils margins outlook: Week of March 4

·        Global base oils values stay more mixed versus feedstock/competing fuel prices; fob Asia and US domestic values hold firmer, Europe and US export prices stay under sustained pressure.

·        Fob Asia base oils prices rise versus regional gasoil prices, especially for heavy grades.

·        Fob Asia Group I bright stock premium to gasoil rises to highest since May 2023.

·        Fob Asia Group II heavy-grade premium to gasoil rises to highest in more than three months.

·        Rising base oils values, and especially heavy-grade values, point to tighter supply-demand fundamentals, incentivize refiners to boost output.

·        China’s domestic Group II light-grade premium to Shandong diesel edges down from eight-month high, falls further behind year-earlier levels.

·        Lower base oils premium vs year-earlier levels curbs incentive for domestic refiners to boost output even as demand gets a seasonal boost.

·        CFR India N70 premium to regional gasoil price extends recovery since early Feb 2024.

·        Higher premium increases incentive for regional refiners to produce more light grades, facilitates sales of the light grades.

·        Europe’s base oils prices stay low vs gasoil and VGO prices.

·        Europe’s Group I domestic light-grade premium to VGO holds close to lowest since April 2023.

·        Europe’s Group II domestic light-grade premium to VGO steadies well below highs of early 2024 and below 1H 2023 levels.

·        Europe’s Group III 4cst (low) premium to VGO holds at lowest since June 2022.

·        Weak or falling premiums sustain incentive for refiners to limit base oils production.

·        Narrower gap between Group I/II and Group III premium boosts competitiveness between the grades.

·        US’ Group II export prices maintain discount to heating oil, stay unusually weak vs VGO.

·        Weak margins incentivize refiners to cut production.

·        US’ Group II domestic prices stay weak vs VGO but at much steeper premiums than export prices, especially for heavy grades.

·        Firmer margins curb incentive to cut margins.

·        US Group II posted price premium to VGO stays weak vs average levels over last two years and vs Q4 2023.