Global base oils margins outlook: Week of 5 Aug

·        Global base oils prices extend rise vs feedstock/competing fuel prices to levels that increase further the incentive for refiners to raise output.

·        Base oils values extend rise at a time of year when they typically face pressure from weak supply-demand fundamentals.

·        Rising base oils values suggests supply-demand fundamentals are firmer than usual, especially for the time of year.

·        FOB Asia base oils prices extend rise vs Singapore gasoil prices, especially for Group II heavy grades.

·        Rising Group I/II base oils price premium to gasoil contrasts with sliding slumping premium throughout Q3 2023.

·        Rising premium sustains incentive for refiners to maintain or raise base oils output, at a time of year when demand typically faces a seasonal slowdown.

·        China’s domestic Group II light-grade premium to Shandong diesel prices rises to highest in more than two months.

·        Domestic Group II heavy-grade premium to Shandong diesel prices rises to highest since late-2021.

·        Domestic Group I light/heavy-grade price premium to diesel prices also extend rise.

·        Rising base oils premiums incentivize refiners to raise base oils output.

·        CFR India Group II N70 premium to Singapore gasoil prices extends rise to highest since H1 June 2024.

·        Rebounding N70 premium facilitates arbitrage to India, incentivizes Asia refiners to offer more light-grade base oils rather than divert the supplies back into diesel pool.

·        Europe’s Group I domestic/export base oils prices extend rise vs VGO to highest since early-2023.

·        Rising premium contrasts with fall in Group I premium to VGO in Q3 2023.

·        Rising premium incentivizes refiners to raise base oils output.

·        Europe’s Group II/III base oils prices extend rebound since early-July 2024, lag pace of rise in Group I values.

·        US Group II light-grade price premium to VGO continues to rise faster than rise in Europe Group II price premium, extending a trend that began in early-March 2024.

·        US Group II export light-grade price premium to VGO extends rise to highest since Q4 2022.

·        US Group II domestic light-grade price premium to VGO extends rise to highest since Q2 2023.

·        Rising light-grade premium points to ongoing supply-tightness, adds to incentive for refiners to maximise output of the grade.