· US Group II base oils price-premium to vacuum gasoil trends higher in recent weeks compared with Q1 2025, even with dip in premium in mid-May..· Group II domestic/export price premium trends higher after holding in relatively narrow range from mid-Nov 2024 to end-Q1 2025..· Narrow range contrasts with steeper fall in Group II export price-premium to VGO in Q4 2023 and Q1 2024, followed by sharper recovery from end-Q1 2024.· Steeper fall in Group II export price-premium in Q4 2023 and Q1 2024 partly reflects steeper drop in outright prices during that period.· Steeper fall in Group II export prices during that period widened sharply their discount to US domestic prices..· Steeper drop in outright export prices during that period helped to open the arbitrage to markets like India and Europe..· More feasible arbitrage helped to facilitate rise in US base oils export volumes in Q4 2023 and Q1 2024, reversing build-up of surplus supplies..· US base oils exports rise even higher in Q1 2025 than in Q1 2024..· Higher exports point to similar need to clear large volume of surplus supplies from US market, and to keep open the arbitrage to facilitate such moves.· But US Group II export prices fall less sharply in Q1 2025 than during same time last year.· Smaller fall in Group II export prices supports their steadier premium to VGO.· Smaller fall in export prices helps to maintain narrower discount to domestic prices so far this year vs Q1 2024..· Firmer export prices, even with large surplus volumes to clear, point to different supply-demand fundamentals in overseas markets that support those diverging dynamics.· Base oils supply falls simultaneously in Americas, Europe, Asia and Middle East in Feb 2025, cutting global supply to lowest since mid-2020..· Tighter global supply shows signs of extending through end-Q1 2025 and into start of Q2 2025 because of plant maintenance work.· Base oils output in South Korea falls in March 2025 to lowest since mid-2023, reflecting that dynamic.· Base oils output in Italy pauses in March 2025 for first time in at least a decade, reflecting that dynamic..· Tighter supply in overseas markets supports firmer prices that help to attract additional supplies.· Firmer overseas prices curb pressure on size of adjustment in US export prices to make the arbitrage workable to attract additional supplies.· Dynamic suggests that firmer US export prices so far this year reflect more the tighter availability in overseas markets rather than a drop in surplus volumes from US market.· Dynamic suggests that any easing supply tightness in overseas markets would put pressure on such a drop in surplus volumes from US market to sustain firm US export prices.· Supply tightness in Asia especially is set to start to ease in coming weeks as more plant maintenance draws to a close.· Dynamic would move onus back onto adjustment in US supplies to sustain firm export prices..Global base oils margins outlook: Week of 19 May.Asia base oils demand outlook: Week of 19 May.Asia base oils supply outlook: Week of 19 May.US' March base oils exports stay high
