Global base oils - week of Nov 6: Price outlook - margins

·        Global base oils values rise versus feedstock/competing fuel prices, ICIS data shows.

·        Firmer light-grade premium to feedstock/competing fuel prices incentivizes refiners to maintain or increase output.

·        Steady or higher output would come at a time when there are fewer outlets for surplus supplies following Mexico’s move to tighten rules on oil products imports from US.

·        Asia Group II base oil premium to regional gasoil prices rises to highest since early July 2023.

·        Asia Group II base oil premium rises close to year-to-date average of $100/t.

·        Firmer premium incentivizes refiners to maintain or raise output.

·        Asia Group I base oil premium rises to highest since 2H July 2023.

·        Asia Group I premium remains well below year-to-date average of around $80/t.

·        Still-weak premium curbs incentive for refiners to maintain or raise output.

·        Domestic China Group II light-grade premium to Shandong diesel prices rises to highest since 1H July 2023.

·        Domestic China Group II light-grade premium to diesel matches year-earlier levels, when the premium extended gains through Nov 2022 and early Dec 2022.

·        Last year’s domestic China light-grade premium rose because of rising outright base oils prices.

·        This year’s domestic light-grade premium rose more because of lower diesel prices.

·        Firmer base oil premium, and China’s weaker diesel premium to crude oil, could incentivize refiners to increase base oils output.

·        Fob Europe Group I price premium to gasoil rises to highest since July 2023.

·        Fob Europe Group I premium to gasoil price rises well above year-to-date average.

·        Domestic Europe Group I light-grade premium to VGO rises to highest since July 2023, holds above year-to-date average.

·        Domestic Europe Group II light-grade premium to VGO climbs to highest since end-Aug 2023, stays close to $100/t below year-to-date average of around $535/t.

·        Diverging price-margin dynamic between Europe Group I and Group II prices could put more pressure on Group II prices to respond to move closer to average levels.

·        Europe Group III (low) price premium to VGO holds close to lowest since end-Q2 2022.

·        US Group II light-grade export prices maintain firm premium to heating oil, incentivizing refiners to maintain or raise output.

·        US Group II light-grade posted-price premium to heating oil rises close to highest since Q2 2023.

·        US Group II light-grade domestic premium to VGO rises to highest since May 2023.

·        US Group II light-grade posted price premium to VGO rises to highest since Q1 2023.

·        US Group III premium to VGO steadies, well up from one-year low in Sep 2023, still well below year-to-date average.