Global base oils arb outlook: Week of 23 June

·         Global base oils price differentials fall sharply relative to feedstock/competing fuel prices in June 2025 following surge in crude oil prices.

·         Speed and size of fall in base oils margins reflects more the surge in crude oil prices rather than sudden, unexpected change in base oils supply-demand fundamentals.

·         Lack of any sudden, unexpected change in supply-demand fundamentals could support reversion of base oils margins closer to their higher levels in early-June 2025 before their slump in recent weeks.

·         Fall in base oils margins in June 2025 follows surge in base oils margins in early-April 2025.

·         Speed and size of rise in base oils margins reflected more the slump in crude oil prices in early-April 2025 rather than sudden, unexpected change in base oils supply-demand fundamentals at that time.

·         Lack of any sudden, unexpected change in supply-demand fundamentals failed to support reversion of base oils margins closer to their lower levels before April 2025.

·         Base oils margins instead extended their gains through April-May 2025.

·         Firmer base oils margins coincided with and reflected tighter global supply-demand fundamentals in early-Q2 2025.

·         US base oils/lube exports to India, Mexico and Africa fall to eleven-month low in April 2025.

·         Lower exports reflect drop in availability of spot volumes as plant-maintenance work in US coincides with seasonal rise in demand at start of Q2 2025.

·         In Europe, Italy’s Group I base oils exports to markets outside Europe fall in April 2025 to lowest level in more than five years.

·         Drop in exports coincides with or precedes round of plant-maintenance work and seasonal rise in demand in Europe at start of Q2 2025, cutting surplus supply.

·         In Asia, South Korea’s base oils exports stay unusually low in May 2025 for fifth time in six months as recent/ongoing plant-maintenance work cuts surplus supply.

·         Slide in base oils margins in June 2025 by contrast coincides with improving supply and weakening demand fundamentals.

·         Supply improves following completion of most plant-maintenance work in key markets around the world.

·         Seasonal slowdown in lube demand during summer months would compound impact of already-weak lube demand in growing number of key markets.

·         Global base oils prices hold firm, rather than fall, in early-Q2 2025 as tight supply-demand fundamentals more than counter impact of lower crude oil prices.

·         Global base oils prices could now face repeat of that dynamic, in reverse, with weaker supply-demand fundamentals at least partially countering impact of higher crude oil prices.