Global base oils margins outlook: Week of 10 Feb

·         Global base oils prices extend recovery vs feedstock/competing fuel prices, especially in Asia.

·         Any extension of recovery in base oils premiums would leave margins bottoming out in Q1 2025 earlier than in Q1 2024.

·         Dynamic would point to balanced-to-tighter supply-demand fundamentals earlier this year than in Q1 2024.

·         FOB Asia base oils prices rise strongly vs Singapore gasoil prices.

·         FOB Asia Group I brightstock premium to gasoil rises to highest in more than three years.

·         Fob Asia light-grade differentials also rebound strongly, rising higher than year-earlier levels.

·         Rising light/heavy-grade price differentials point to increasingly firm supply-demand fundamentals, suggest any recent weakness has passed.

·         China’s domestic Group II N150 premium to Shandong diesel prices continues to edge lower, contrasts with higher levels the same time a year earlier.

·         Lower and falling price premium points to weaker fundamentals compared with same time a year earlier, at a time of year when demand typically gets a seasonal boost.

·         CFR India Group II N70 premium to Singapore gasoil price extends sharp recovery to highest this year.

·         Sustained rebound in N70 premium coincides with India’s still-high domestic diesel premium to CFR India N70 premium.

·         High domestic premium to Group II N70 typically coincides with stronger demand for very-light grade base oils.

·         Rising CFR India N70 premium to Singapore gasoil makes arbitrage more feasible for Asia-Pacific refiners, boosts incentive to produce more base oils instead of diesel.

·         Europe’s Group I export base oils price premium to VGO extends recovery after bottoming out in mid-Jan 2025.

·         Any extension of trend would point to export price premium bottoming out in Q1 2025 at higher level than in Q1 2024.

·         Dynamic would add to signs of firmer supply-demand fundamentals this year vs Q1 2024.

·         US Group II N100/120 export price premium to VGO steadies after sustained fall since Sept 2024.

·         Export price-premium steadies at higher level than same time a year-earlier, mirroring similar trend in Europe.

·         US domestic Group II N100/120 price premium to VGO steadies at similar level to year-earlier levels.

·         Weaker performance of domestic Group II N100/120 price differential vs Group II export price differential could point to firmer supply-demand fundamentals in export market.

·         Low US Group II price differentials vs VGO contrast with increasingly firm heating oil premium to crude oil, sustaining incentive for refiners to prioritise output of middle distillates.