Global base oils margins outlook: Week of 4 Nov

·        Base oils price premium to VGO/competing fuel prices holds in narrower range in Europe and Asia over past month.

·        Steadier premiums at firm levels incentivize refiners to maintain or raise firm output levels.

·        US base oils prices vs VGO/competing fuel prices hold steadier after recent slide that increased incentive for refiners to adjust output to halt the slide.

·        FOB Asia Group I/II premium to Singapore gasoil falls in past week, stays in narrower range over past two months.

·        Group I/II base oils premium stays high, especially for heavier grades and especially for time of year.

·        Firm margins incentivize refiners to maintain higher output at time of year when demand typically faces seasonal slowdown.

·        China’s domestic Group II price premium to Shandong diesel prices edges lower, hold in narrow range since start of 2024.

·        Steadiness of Group II premium contrasts with much more volatile margins in 2022- 2023, with premiums that were much higher and lower than in 2024.

·        Steadiness of Group II premium points to margins at levels that incentivize sufficient supply to meet demand.

·        CFR India Group II N70 premium to Singapore gasoil falls, extending period of unusual volatility over past month.

·        N70 premium moves closer to lower end of range so far in 2024.

·        Signs of N70 premium falling to/holding at lower levels could point to softening supply-demand fundamentals for the grade.

·        Europe domestic Group I base oils premium to VGO holds relatively firm, in narrow range over past month, after correcting lower in H2 Sept 2024.

·        Firm Group I margins curb pressure on refiners to adjust output ahead of seasonal slowdown in demand.

·        Europe Group III 4cSt (low) base oil premium to VGO extends gradual fall in past month after trending higher in the two months to mid-Sept 2024.

·        Weaker Group III margins could point to diverging fundamentals vs Group I base oils.

·        Europe’s Group II premium to VGO rises faster than US Group II premium to VGO.

·        Europe’s widening Group II premium vs US Group II premium extends trend that began in H1 Aug 2024.

·        US Group II base oils export premium to VGO steadies after falling sharply since H1 Sept 2024.

·        Group II premium starts falling in H2 2024 more than a month earlier than a similar trend in H2 2023.

·        Earlier fall in base oils premium this year puts earlier pressure on refiners to respond accordingly.