Global base oils - week of Sep 25: Price outlook - margins

·        Global base oils values improve versus diesel/feedstock prices but remain unusually weak, especially for export prices, ICIS data shows.

·        Trend incentivizes refiners to cover domestic/regional term commitments, limit export shipments and remove any surplus supply.

·        Group III values extend slide versus diesel and feedstock prices, remain well above Group I/Group II values versus diesel.

·        Still-firm Group III premium to diesel curbs pressure on refiners to cut output in the same way as Group I/II refiners face pressure to cut output.

·        Asia Group I light/heavy neutrals export prices maintain discount to gasoil prices even as outright prices rise.

·        Group I light-grade prices maintain discount to gasoil prices for more than two months.

·        Asia Group II export prices revert to small premium to gasoil prices for first time in two months.

·        Still-weak base oil export values incentivize refiners to focus on diesel production, cut base oils output or target even higher prices.

·        China’s domestic Group II light-grade premium to Shandong diesel prices widens, holds in narrow range since early August close to lowest since Oct 2022.

·        Narrow base oils premium contrasts with relatively firm diesel premium to crude, curbing incentivize for domestic refiners to raise base oils output.

·        Europe’s domestic Group I heavy-grade premium to gasoil holds at lowest since Q2 2022.

·        Europe’s export Group I light-grade prices maintain discount to gasoil even as outright prices extend rebound.

·        Europe’s domestic Group I/II base oils prices extend slide vs VGO to lowest since Q1 2022; Group III values fall more steeply to lowest since Q2 2022.

·        Trend incentivizes refiners to prioritise domestic market and diesel production.

·        US Group II light-grade domestic prices rise versus heating oil, hold close to lowest since Q2 2022; export prices hold at discount to heating oil.

·        US Group III prices extend fall vs VGO to lowest since Q2 2022.

·        US Group II light-grade posted price premium to heating oil recovers to highest since end-June 2023, still unusually low.