Global base oils - week of Nov 27: Price outlook - margins

·        Global base oils prices hold at firm levels versus competing fuel/feedstock prices even as premium falls in some markets, ICIS data shows.

·        Base oils values hold relatively firm because of/despite recent slide in crude oil prices.

·        Lack of significant change in base oils values points to balanced-to-tight supply-demand fundamentals in several markets.

·        Firm base oils values incentivize refiners to maintain or increase base oils output at a time when demand typically faces a seasonal slowdown at year-end and start of the new year.

·        Any such trend could trigger build-up of surplus supply.

·        Asia’s Group I/II export price premium to gasoil holds firm even as it extends fall for second week.

·        Asia Group I SN 150 price reverts to discount to gasoil, after rising to premium in early Nov 2023 for first time in more than three months.

·        Asia Group II N150 premium of around $120/t remains above average of around $85/t so far this year.

·        China’s domestic Group II light-grade base oil price premium to Shandong diesel prices falls for first time in more than two months.

·        China’s Group II price premium to diesel falls because of lower outright prices.

·        China’s lower Group II price premium could prompt some refiners to slow restart-plans following recent resumption of several units.

·        China’s Group II price premium to diesel also fell sharply at the beginning of Dec 2022 following a sharp rise from mid-Sep 2022.

·        China’s Group II price premium to diesel then rebounded even higher from mid-Dec 2022.

·        Cfr India N70 premium to regional gasoil prices extends sharp fall, by more than $70/t so far in Nov 2023.

·        Speed of slide in premium relative to other grades points to more plentiful supply versus other grades.

·        Concern that N70 premium could extend slide could incentivize regional refiners to reconsider production plans.

·        Europe’s Group I domestic and export prices stay firm vs gasoil and VGO prices and above average levels for the year.

·        Europe’s Group I SN 150 premium to VGO holds close to $380/t, above average-for-the-year of less than $350/t but below year-earlier levels of more than $650/t in 2H Nov 2022.

 ·        Europe’s Group II N150 premium to VGO extends recovery to around $520/t, still lags average for the year of more than $530/t.

·        Europe’s Group II N150 premium to VGO recovers from less than $400/t at end-Sep 2023, stays well below levels of more than $850/t in 2H Nov 2022.

·        US Group II export base oils price premium to heating oil extends fall, but much more sharply for heavy grades.

·        US Group II export light-grade premium to heating oil stays relatively firm and well above average for the year.

·        US Group II export heavy-grade premium to heating oil falls well below average for the year.

·        Trend could incentivize refiners to maintain steady run-rates as strength of one grade compensates for weakness of the other.

·        US domestic Group II light-grade premium to VGO holds firm, and Group II heavy-grade premium to VGO even firmer.

·        Firm Group II domestic base oil values vs feedstock prices add to incentive for refiners to maintain or raise output.

·        US Group II heavy-grade posted price premium to VGO falls to levels below average for the  year.