Global base oils arb outlook: Week of 7 April

·         US Group II base oils export price-discount to CFR India prices widens further through March 2025 even ahead of imposition of US tariffs and slump in crude oil prices.

·         US Group I brightstock export price flips to rare discount to CFR India price in recent weeks.

·         Ongoing weakness of US export prices points to weaker-than-usual domestic demand.

·         Ongoing weakness of US export prices versus prices in destination markets facilitates arbitrage opportunities to markets like India and West Africa.

·         Ongoing weakness of US export prices contrasts with rebounding US export prices from March 2024.

·         Rebounding export prices from March 2024 follow pick-up in domestic demand and surge in exports, slashing US stocks throughout H1 2024.

·         Rebounding US export prices and tighter supply in March 2024 close arbitrage to outlets like Africa and India.

·         Rebounding US export prices and tighter supply in March 2024 give refiners more leverage to adjust prices in response to firmer supply-demand fundamentals.

·         Ongoing weakness of US export prices versus prices in destination markets into Q2 2025 contrasts with sustained strength of Asia export prices versus prices in destination markets so far this year.

·         FOB Asia Group II base oils price-discount to CFR India price stays narrower so far in 2025 than in Jan-Apr 2024.

·         Narrower price-discount partly reflects firm FOB Asia cargo prices.

·         FOB Asia cargo prices get support from tight supply as widespread round of plant maintenance cuts output in markets like South Korea.

·         FOB Asia cargo prices get additional support from firm demand in markets like India and Thailand.

·         Firm Asia cargo prices and tight fundamentals keep arbitrage shut to more distant outlets.

·         Ongoing weakness of US export prices at start of Q2 2025 suggests US supply-demand fundamentals are different from Asia and different from this time a year ago.

·         US base oils stocks extend rise in Jan 2025, contrasting with shrinking stocks from Jan 2024 to Q3 2024.

·         Ongoing weakness of US export prices coincides with round of maintenance work affecting some major base oils units in North America.

·         Round of plant maintenance work mirrors similar dynamic in Asia.

·         Ongoing weakness of US export prices points to need to keep arbitrage open to clear lingering surplus supply despite plant maintenance work.

·         Contrasting price-dynamics between US and Asia suggest Asia faced typical seasonal pick-up in demand from end-Q1 2025, magnifying impact of lower supply.

·         Contrasting price-dynamics suggests US already faced more muted pick-up in demand from end Q1-2025 even before slump in crude oil prices and imposition of US tariffs in early April 2025.