Global base oils arb outlook: Week of 28 July

·         India’s imported Group I heavy neutrals base oils cargo price strengthens relative to FOB Asia and Europe prices in July 2025.

·         India’s rising price-differential for Group I SN 500 follows drop in availability of the supplies from Iran especially in recent months.

·         India’s imports of Group I heavy neutrals fall to eighteen-month low in June 2025, mostly because of drop in supplies from Middle East.

·         India’s Group I imports from Thailand and Indonesia also pause in June 2025 for second month.

·         Pause in shipments precedes extended shutdown of key Group I base oils unit in Thailand during Q3 2025.

·         Tighter availability of Group I base oils in Asia and Middle East in early-Q3 2025 contrasts with prospect of rise in surplus Group I supplies in Europe.

·         Group I supply in Europe likely to get boost from combination of completion of plant-maintenance and seasonal slowdown in demand during summer months.

·         Rise in surplus volumes would contrast with Europe's tighter supply and lower Group I exports in H1 2025.

·         Tighter Group I supply and squeezed exports in H1 2025 keep shut the arbitrage from Europe to markets like Middle East and India.

·         Easing supply tightness in Q3 2025 could put pressure on arbitrage from Europe to open to clear any surplus volumes.

·         With its firmer demand and higher prices for Group I heavy neutrals, India could provide a useful outlet for any surplus volumes from Europe.

·         Even with India’s firmer Group I fundamentals in recent weeks, buyers could instead tap growing availability and increasingly competitive prices for Group II heavy grades to cover requirements.

·         Prospect of improving availability of Group I supplies from Middle East would provide additional options.

·         Dynamic puts onus on any surplus Group I cargoes from Europe to be lined up fast and to be at competitive price level to make arbitrage to India more feasible.

·         Any such moves to tap India’s firmer demand could help to clear any surplus supplies from Europe, leaving the region with more balanced fundamentals during final weeks of Q3 2025.

·         Need for FOB Europe Group I export cargo price to be at more competitive level could cut attraction of lining up any such shipments, especially if surplus is deemed to be manageable.

·         Any such resistance to more competitive price levels would provide opportunity for supplies from other sources to move to India.

·         Any such moves could then leave Europe with more surplus volumes to clear during final weeks of Q3 2025.