Global base oils margins outlook: Week of 24 Feb

·         Global base oils values hold firm or rise versus feedstock/competing fuel prices.

·         Margins hold firmer earlier than usual for time of year, pointing to more balanced supply-demand fundamentals ahead of seasonal pick-up in consumption.

·         FOB Asia base oils price premium to Singapore gasoil price stays higher than usual, incentivizing refiners to raise output levels.

·         Persistence of firm premium points to still-tighter supply-demand fundamentals even with incentive to raise output.

·         FOB Asia Group I SN 500/brightstock price premium to Singapore gasoil stays higher than usual, more than cushioning impact of lower SN 150 price differential.

·         Asia’s shrinking Group I production capacity, and wave of plant maintenance in Jan-July 2025, complicate refiners’ ability to raise output in response.

·         China’s domestic Group II N150 price premium to Shandong diesel prices extends fall.

·         Excluding sharp drop in early Jan-2025 because of surge in crude price, domestic N150 premium falls to lowest since end-2023.

·         Premium extends fall at a time of year when it typically peaks for the year.

·         Falling premium points to weaker-than-usual fundamentals for the time of year.

·         CFR India Group II N70 premium to Singapore gasoil price extends recovery to highest since early-Dec 2024.

·         Recovery pushes N70 premium back into its narrow, firm range throughout 2024.

·         Firmer premium makes more feasible the arbitrage to move very light grades to India.

·         Sustained recovery in premium points to firm buying interest for such supplies.

·         Europe’s Group I export base oil price premium to VGO extends recovery after bottoming out in mid-Jan 2025.

·         Unusually firm premium for time of year adds to signs of smaller-than-usual surplus for time of year.

·         Unusually firm premium incentivizes refiners to produce additional supplies for export market.

·         US domestic Group II N100/120 and Group III 4cSt premium to VGO hold steady for more than a month.

·         Group II premium steadies at similar level to its lowest level in Q1 2024.

·         Group III 4cSt premium steadies close to lowest level since early 2020.

·         Low Group II/III premiums contrast with recent recovery in heating oil premium to crude, boosting incentive for refiners to prioritise maximising distillates output.

·         Lower yield of Group III production compared with Group II compounds impact of weak margin, adding to incentive to produce more distillates.