Global base oils - week of Oct 9: Price outlook - margins

·        Global base oils prices rise versus crude and diesel, reflecting lag in any price-adjustment following last week’s sharp slide in crude oil prices, ICIS data showed.

·        This week’s crude price recovery raises prospect of base oils prices holding firm for now.

·        Any extended time-lag would maintain the wider base oils premium to crude/diesel unless crude prices extend this week’s recovery.

·        A wider base oils premium to crude/diesel would incentivize refiners to maintain or increase base oils output.

·        Any such adjustment to production would coincide with seasonal slowdown in demand in most markets in coming weeks.

·        Any sustained recovery in base oils values vs crude/diesel would leave refiners facing choice of responding to rebounding base oils margins by raising output or responding to prospect of seasonal slowdown in demand by cutting output.

·        Steady outright Asia base oils prices trigger rise in premium versus lower feedstock and gasoil prices.

·        Steady-to-firm outright prices reflect current balanced-to-tight supply-demand fundamentals.

·        Strong rise in Asia base oils margins insinuate tight supply and strong demand, raising prospect of rise in supply in response.

·        Such a move raises risk of build-up of surplus supply, leaving refiners with less leverage to adjust prices.

·        Europe’s base oils prices rebound versus gasoil to highest in more than two months, from lowest in Sep 2023 at least since start of the year.

·        Europe’s domestic Group I base oils prices recover from five-month low versus to VGO at end-Sep 2023 to highest in more than a month.

·        Europe’s Group III 4cst (low) price versus VGO extends fall to lowest since June 2022 as outright prices extend fall.

·        US base oils prices rebound vs heating oil to highest in more than two months.

·        US Group II light-grade export price rebounds to steep premium to heating oil.

·        US Group II light-grade premium to VGO rises to highest in almost two months.

·        US Group II light-grade posted price premium to heating oil rebounds to highest since early-June 2023.