Global base oils arb outlook: Week of 11 August

·         US Group III 4cSt base oils price-premium to Group II light grades falls at end-July for first time in three months, before extending dip in August 2025.

·         Asia’s Group III 4cSt (low) price-premium to Group II light grades starts trending lower from late-June 2025.

·         Europe Group III 4cSt (low) price-premium to Group I and Group II light grades continues to edge higher after protracted slump since early-2023.

·         Global Group III price-differentials stay weak or start to slip relative to Group I/II base oils after rising at start of Q2 2025.

·         Firmer Group III price-differentials at start of Q2 2025 coincide with heavy round of maintenance work or production issues that cut Group III output globally during that period.

·         Global base oils imports from Bahrain and UAE fall to thirty-five-month low in May 2025 amid heavy round of plant-maintenance in Middle East in Q2 2025.

·         Asia’s Group III base oils imports from Middle East extend slide to four-month low in June 2025.

·         In Europe, Group III base oils exports from Spain fall to multi-year low in June 2025.

·         In China, sustained fall in domestic Group III base oils output extends into July 2025.

·         Drop in Group III base oils supply coincides with seasonal rise in demand in US, Europe and Asia.

·         Tighter supply-demand fundamentals coincide with and support firmer Group III base oils prices relative to other grades and relative to feedstock prices.

·         Even with tighter supply-demand fundamentals, recovery in Group III base oils prices is relatively muted.

·         US/Europe Group III 4cSt price-premium to vacuum gasoil prices recovers from early-2025, but only to highest since Sept-Oct 2024.

·         Even with recovery, US/Europe Group III 4cSt price-premium to VGO of around $600-650/tonne in July 2025 remains down from more than $1,400/tonne at end-2022/early 2023.

·         Even with recovery in recent months, global Group III 4cSt price-premium to Group I and Group II base oils remains unusually narrow in 2025.

·         Group III prices stay weak despite tighter supply and stronger demand fundamentals in Q2 2025.

·         Those tight fundamentals now start to unwind in Q3 2025 following completion of most plant-maintenance work.

·         Group III base oils price-differentials duly resume their downward trend, from already-low levels, in most markets.