Global base oils margins outlook: Week of 13 October

·         Global base oils prices mostly hold firm versus feedstock/competing fuel prices amid further drop in crude oil prices.

·         Mostly-steady outright base oils prices and lower crude prices cushion impact of strong gasoil premium to crude oil.

·         Strong gasoil crack-spread incentivizes any refinery moves to trim output levels to focus more on light grades than heavy grades.

·         Margins that incentivize steady or higher heavy-grade output coincides with time of year when demand typically slows.

·         FOB Asia heavy-neutrals base oils prices continue to trend lower vs Singapore gasoil, while light-grade price-differentials hold in narrower range.

·         Heavy-grade price margins face pressure from persistent surplus supply.

·         Heavy/light-grade base oils margins continue to face pressure from firm gasoil premium to crude oil.

·         Still-steep premium of Group II heavy grades over light grades incentivizes refiners to focus any output-changes on light grades rather than heavy grades.

·         Any such moves would compound current supply-demand imbalance between light and heavy grades.

·         Domestic China Group II N150 price-premium to Shandong diesel holds steadier.

·         Steadier N150 price-premium stays slightly below highs of H1 Sept 2025.

·         Steadier N150 price-premium to diesel contrasts with sharp fall in price-premium from end-Sept 2024.

·         Steadier price-premium this year could point to more balanced supply-demand fundamentals despite high domestic output in Aug-Sept 2025.

·         Dynamic could point to firmer demand or to impact of some domestic plant-maintenance work in early-Q4 2025, or to combination of both.

·         Either way, steadier price-premium curbs incentive for refiners to trim output.

·         CFR India Group II N70 price-premium to Singapore gasoil holds firm, pointing to strong demand and balanced-to-tight supply.

·         N70 price-premium holds at level that makes feasible the arbitrage to move supplies from Asia to India.

·         Strong gasoil premium to crude oil could still incentivize Asia refiners to focus more on diesel production instead of light-grade base oils.

·         Firm N70 price-premium to gasoil/heating oil, and any sustained slowdown in US shipments to Mexico, could boost incentive to move more of those supplies to India.

·         Europe Group III 4cSt (low) price-premium to fuel oil holds firm after sustained rebound since early-2025.

·         Rise in Group III price-premium far outpaces firm Group II light-grade price-premium to fuel oil.

·         Firm Group III price-premium points to increasingly strong fundamentals versus Group II base oils, incentivizes suppliers to boost regional output or move more shipments to Europe.

·         US Group II light-grade domestic base oils prices remain in narrow range vs vacuum gasoil (VGO).

·         Relative narrowness of price-range so far this year contrasts with more volatile spot and posted-price margins in 2023 and 2024.

·         Stability of price margins points to more balanced supply-demand fundamentals this year compared with 2023-2024.

·         Stability of price margins incentivizes refiners to maintain high output, with expectations of sufficient domestic or overseas demand to absorb the supplies.