· Global base oils values turn unusually volatile versus diesel prices in recent weeks, ICIS data shows.· A sustained pick-up in base oils values versus diesel would raise prospect of curbing demand from buyers using light-grade base oils as a fuel-extender.· US Group II light-grade export base oil prices maintain premium to heating oil even as they fall from recent highs.· India Group II very-light-grade price premium to regional gasoil prices rises in October to highest in more than two months..· Mexico’s demand for US base oils held firm through Q3 2023.· Strong demand coincided with low US base oils export prices versus heating oil throughout the year, especially in Q3 2023.· Mexico’s demand for US base oils supplies exceeds its base oils requirements to produce lubricants by larger-than-usual amount throughout 2023.· Mexico’s surplus of base oils supply over finished lube demand gathers pace in Aug 2023..· A share of the surplus supplies is likely used as a fuel-extender.· Larger-than-usual US base oils exports to Mexico enable refiners to clear surplus light-grade supplies from their domestic market.· Attraction of Mexico as outlet for surplus supplies rose in recent months as higher US outright prices during Q3 2023 made less feasible the arbitrage to outlets like India.· US arbitrage to India could get even harder to work amid prospect of rising Asia-Pacific supplies of very-light grade base oils in coming months..· Any such rise in supplies would incentivize refiners in Asia to offer light-grade base oils at prices that sustain firm demand.· India’s retail diesel price premium to cfr India light-grade base oils prices fell in recent months to narrowest in more than a year..· Wider retail diesel premium to light-grade prices had previously coincided with stronger demand for light-grade base oils.· Asia’s and India’s imported base oils prices would need to fall to widen India’s retail diesel premium to light-grade base oils closer to levels earlier this year.· Rebound in Asia light-grade price premium to regional gasoil prices gives refiners more room to adjust prices accordingly in order to boost demand.· Any such move would cut further the attraction of supplies from US, which also faces the prospect of more muted demand from Mexico.· Any need to sustain firm consumption in markets like India and Mexico would raise prospect of outright price adjustments in Asia and in the US.· Refiners could delay such moves to adjust prices in face of unusually volatile crude/diesel prices in recent weeks.· The same factors could prompt buyers to hold off for now, raising prospect of supply-build in the interim..Global base oils - week of Oct 16: Price outlook - margins
