Global base oils - week of Jan 22: Price outlook - margins

·        Global base oils export prices face more pressure vs feedstock/competing fuel prices, ICIS data shows.

·        Global domestic prices remain relatively firm vs feedstock/competing fuel prices.

·        Trend incentivizes refiners to adjust production to limit supplies for export markets.

·        Fob Asia Group II base oils premium to regional gasoil prices steadies close to lowest in more than three months.

·        Lower premium cuts attraction of producing additional supplies.

·        Fob Asia Group I base oils premium to gasoil maintains narrow range since mid-Nov 2023.

·        Fob Asia Group I premium to gasoil remains up more than $150/t since late Q3 2023.

·        Relatively firm Group I premium incentivizes refiners to produce more base oils.

·        Domestic China Group II light-grade price premium to Shandong diesel prices extends rise to highest since early July 2023.

·        Firmer premium contrasts with relatively weak domestic diesel premium to crude.

·        Trend incentivizes domestic refiners to boost base oils output.

·        Cfr India N70 premium to Asia gasoil prices steadies close to lowest since early Oct 2023.

·        Lower premium cuts attraction for Asia’s refiners to move more very-light grades to India.

·        Europe’s Group I export prices weaken versus gasoil prices at least to lowest since start of Q4 2023.

·        Lower premium cuts attraction of producing additional Group I supplies.

·        Europe’s Group I domestic price premium to VGO slips in recent weeks, holds in narrow range since start of Q4 2023.

·        Steadier values contrast with sharp slide in Group I premium to VGO at end-2022/early 2023.

·        Europe Group II light-grade premium to VGO falls to two-month low, holds well above Q3 2023 levels.

·        Europe Group III 4cst (low) premium to VGO falls to lowest since 1H 2022, even if from unusually high levels in 1H 2023.

·        US Group II light/heavy export prices weaken further vs heating oil.

·        US Group II light-grade weakness vs heating oil adds to frequent periods of similar weakness over past year.

·        US Group II heavy-grade weakness vs heating oil is unusual, adds to pressure on refiners to cut production.

·        US Group II domestic price premium to VGO extends fall since mid-Nov 2023, with heavy-grade premium dipping to lowest since 1H 2022.

·        US Group II premiums to VGO remain unusually high vs typical levels before 2021.

·        Firm domestic Group II premium to VGO curbs incentive for refiners to cut output.

·        US Group III price premium to VGO extends fall to lowest since 1H 2022.

·        US Group II posted price premium to heating oil/VGO edges lower, stays unusually firm.

·        Firm premiums incentivize refiners to maintain/raise output.