Global base oils margins outlook: Week of 10 March

·         Base oils prices extend rise vs feedstock/competing fuel prices in Asia and Europe, pointing to tighter supply-demand fundamentals.

·         US base oils premium to VGO/heating oil stays in narrower range, lagging rise in Asia and Europe.

·         Dynamic points to diverging fundamentals between US and other regions.

·         FOB Asia base oils prices extend rise vs Singapore gasoil prices, pointing to increasingly tight supply-demand fundamentals.

·         Firm margins, and weaker diesel premium to crude oil, incentivize refiners to maximise base oils output.

·         Any subsequent pick-up in output would help to cushion impact of plant maintenance in the region.

·         FOB Asia Group II N500 premium to gasoil rises to highest since Q4 2021.

·         FOB Asia N500 premium breaks out of narrow range it held in for most of past six months.

·         China’s domestic Group II N150 premium to Shandong diesel stays unusually low, especially for time of year, even as it edges up.

·         Without any extension of past week's recovery, low premium would point to weaker-than-usual supply-demand fundamentals in China for the time of year.

·         CFR India Group II N70 premium to Singapore gasoil extends sharp rebound to highest since Sept 2024.

·         Surging premium facilitates arbitrage shipments to India, increases incentive for overseas producers to boost very-light grade base oils supply.

·         Incentive to increase shipments of very-light grade supplies contrasts with India's narrowing domestic diesel premium to CFR India N70 price in recent months.

·         Narrowing domestic diesel premium could dampen India's demand for very-light grades.

·         Europe’s Group I base oils export price premium to vacuum gasoil (VGO) extends rise, especially for brightstock.

·         Brightstock premium to VGO rises to highest since Q4 2022, while light/heavy-neutrals premiums far outpace year-earlier levels.

·         Price strength points to tighter supply-demand fundamentals, earlier than usual.

·         Rise in Europe and Asia base oils price premium to VGO/gasoil contrasts with steady US Group II premium to VGO.

·         Steady US Group II export price premium to VGO since mid-Jan 2025 contrasts with slumping premium in Jan-Feb 2024.

·         Higher US Group II premium vs year-earlier levels points to firmer supply-demand fundamentals compared with that period.

·         Steady US Group II premium vs rising base oils premium in Europe and Asia points to weaker supply-demand fundamentals compared with those markets.