Global base oils - week of Dec 18 Price outlook - margins

·        Global base oils prices more mixed versus feedstock/competing fuel prices, with Europe values extending rise, US values holding steadier, and Asia Group II values slipping, ICIS data shows.

·        Still-firm premiums to VGO/diesel curb pressure on refiners to trim output at a time of year when demand is slowing.

·        Asia’s Group II base oils prices extend fall vs gasoil to lowest in almost two months, below average for the year.

·        Group II premium to gasoil falls more steeply than Group I base oils throughout Asia, domestic China and India markets.

·        Trend highlights diverging supply dynamics for Group I and Group II base oils.

·        China’s domestic Group II light-grade premium to diesel prices rises for second week.

·        Domestic base oils premium to diesel holds well above levels in Q3 2023, down from Dec 2022 levels.

·        Domestic base oils premium to diesel rebounded from late-Jan 2023 through rest of 1H 2023.

·        Domestic base oils premium in Dec 2023 shows signs of repeating that trend, even if at lower levels.

·        Trend would point to more balanced supply-demand fundamentals vs year-earlier levels.

·        Cfr India Group II N70 premium to gasoil resumes fall to lowest since early Oct 2023, slips below average for the year.

·        Ongoing slide in N70 premium could incentivize overseas refiners to redirect supplies into diesel pool instead.

·        Europe’s Group I/II base oils prices extend rise vs gasoil/VGO, incentivizing refiners to target the region with more supplies.

·        Any such rise in supplies would coincide with seasonal slowdown in demand.

·        Trend points to either tighter-than-expected supply-demand fundamentals, or prospect of rise in surplus supply.

·        Europe’s Group III 4cst (low) premium to VGO stays close to lowest since Q2 2022, holds well above typical levels before 2021.

·        US Group II export price premium to heating oil extends slide.

·        Strength of US Group II heavy-grade prices previously cushioned weakness of light-grade prices.

·        Simultaneous weakness of light and heavy-grade prices adds to pressure on US refiners to adjust output.

·        Increasingly steep premium of US Group II domestic prices to export prices supports firmer domestic values vs feedstock/competing fuel prices.

·        Trend could impact pace of any moves by refiners to adjust output, raising prospect of supply-build.

·        US Group III base oils premium to VGO holds in steadier range during Q4 2023, close to lowest since Q2 2022.

·        US Group III base oils premium to VGO stays well above Group II premium to VGO, even if down sharply since mid-2023.

·        Still-firm Group III premium likely maintains incentive for refiners to consider switching to produce Group III base oils instead of Group II.

·        US Group II posted prices maintain steep premium to domestic prices and feedstock prices.

·        Higher-than-usual posted price premium could incentivize blenders to hold back at a time of year when demand is already weak.