Global base oils - week of Dec 11: Price outlook - margins

·        Global base oils prices mostly extend rise vs feedstock/competing fuel prices, ICIS data shows.

·        Firm/widening premium to VGO/diesel incentivizes refiners to maintain or increase production at a time of year when demand typically faces a seasonal slowdown.

·        Asia base oils prices extend rise vs regional gasoil prices.

·        Asia Group I SN 150 premium to gasoil extends rise to highest since 1H Jun 2023.

·        Asia Group II N150 premium to gasoil stays high vs Q3 levels, down from recent high in 1H Nov 2023.

·        Firmer rebound in premium of Group I base oils to gasoil reflects their tighter supply fundamentals.

·        China’s domestic Group II light-grade premium to Shandong diesel prices steadies after sustained slide for almost a month.

·        China’s light-grade premium to diesel steadied the same time a year earlier before rebounding strongly over the following four months.

·        Any repeat of that scenario over the coming months would point to stronger pick-up domestic demand.

·        Premium of cfr India N70 over regional gasoil prices edges up after sharp fall since 1H Nov 2023.

·        N70 premium stays well above Q3 2023 levels, supports incentive for overseas refiners to maintain steady/higher output of the product.

·        Europe’s Group I export base oil premium to gasoil prices extends rise to highest since end-Q2 2023.

·        Europe’s Group I export SN 150 premium to VGO extends rise to highest this year.

·        Europe’s domestic Group I SN 150 premium to VGO rises but less strongly than export price premium.

·        Trend reflects narrowing domestic price-premium to export prices since Aug 2023 and signs of still-limited availability for export.

·        Europe’s Group II light-grade price premium to VGO extends rise to highest since July 2023.

·        Europe’s Group II light-grade premium to VGO rises above average of around $530/t so far this year.

·        Europe’s Group II light-grade premium to VGO rises more strongly than Group I SN 150 premium since end-Oct 2023.

·        Widening Group II price premium to Group I prices in recent weeks mirrors year-earlier trend, could incentivize blenders to use more Group I instead.

·        Europe’s Group III 4cst (low) premium to VGO extends fall to lowest since Q2 2022.

·        Falling Group III premium contrasts with firmer Group I/II premium, reflecting diverging fundamentals.

·        Trend cuts Group III premium to Group I/II to narrowest in more than a year.

·        Increasingly narrow premium to Group I/II could incentivize blenders to consume more Group III instead.

·        US Group II light-grade export prices flip back to discount to heating oil for first time since Sep 2023.

·        US Group II heavy-grade export price premium to heating oil slumps to lowest in nineteen months.

·        Previous fall in US heavy-grade export price premium to heating oil reflected volatility/surge in heating oil prices in Feb-Apr 2022.

·        Latest fall in heavy-grade export price premium reflects slump in outright price.

·        Slump in light/heavy grade premium to heating oil incentivizes refiners to minimize output to cover term commitments only.

·        US domestic Group II light-grade premium to VGO falls to lowest in more than a month.

·        Light-grade premium to VGO holds firm vs Q3 2023 levels and especially vs fob export levels.

·        Trend reflects surging Group II domestic premium to fob export prices since end-Oct 2023.

·        Relatively firm Group II domestic prices could limit incentive for refiners to lower production.

·        US Group III 4cst premium to VGO steadies close to lowest since Q2 2022.

·        US Group II posted prices stay relatively high vs VGO, well above Q3 2023 levels, even after recent posted-price cut.

·        US Group II light/heavy-grade posted price reverts to unusually steep premium to domestic prices.

·        Wide premium could incentivize buyers to hold back in anticipation of lower prices.