Global base oils margins outlook: Week of 8 July

·        Global base oils values stay mixed vs feedstock/competing fuel prices.

·        Base oils margins stay firm in US, firm in Europe for Group I base oils, and extend slide in Asia.

·        Differing trends point to diverging fundamentals in different markets for different base oils grades.

·        Asia’s base oils prices extend sharp slide vs regional gasoil prices since early June 2024.

·        FOB NE Asia Group II N150 premium to gasoil falls to lowest since March 2024; N500 falls to lowest since H1 April 2024.

·        FOB NE Asia and ex-tank Singapore N500 premium to gasoil remains much higher than at start of 2024.

·        Still-firm premium could curb urgency for refiners to adjust output.

·        Premium's downward trend, and similar such slide in Q3 2023, could incentivize refiners to adjust output anyway.

·        China’s domestic Group II N150 premium to Shandong diesel prices edges higher, holding in middle of range since end-2023.

·        Firm premium contrasts with sliding FOB NE Asia Group II premium to regional gasoil prices.

·        Firm premium points to more balanced supply-demand fundamentals in China, especially compared with rest of Asia.

·        CFR India N70 premium to Singapore gasoil prices extends fall to lowest since H1 Feb 2024.

·        Lower premium cuts feasibility of moving more shipments from Asia to India unless Asia refiners cut price offers.

·        Lower price offers would boost incentive for refiners to produce more diesel instead.

·        Europe’s Group I domestic and export prices hold firm vs VGO prices, contrasting with sliding margins in Asia.

·        Europe’s firm Group I premium to VGO contrasts with ongoing dip in Group II/III premium to VGO.

·        Trend suggests Group I and premium-grade supply-demand fundamentals continue to diverge.

·        US Group II base oils price premium to VGO holds steady and firm, even after sustained rebound in crude oil prices since early June 2024.

·        Firm price premium sustains incentive for refiners to maintain or raise base oils output.

·        US Group II light-grade price premium almost matches Europe Group II light-grade price premium.

·        Similar premium curbs incentivize for US refiners to move more shipments to Europe.