Global base oils margins outlook: Week of 18 August

·         Global base oils prices hold firm or rise vs feedstock/competing fuel prices.

·         Base oils margins hold firm at time of year when supply-demand fundamentals are typically weaker.

·         Firm base oils margins instead point to stronger-than-usual fundamentals for time of year.

·         Firm base oils margins incentivize refiners to maintain or raise output.

·         Fundamentals would need to be stronger than usual to absorb steady or higher output.

·         Alternative is rise in surplus supply.

·         FOB Asia base oils prices rise vs Singapore gasoil prices, especially for light grades.

·         FOB Asia Group I SN 500 price-premium to gasoil rises to highest since early-June 2025, narrows gap to Group II heavy-neutrals price-premium.

·         Strength of price margins incentivize refiners to maintain or raise output of heavy grades.

·         FOB Asia Group II N150 price-premium to gasoil rises to highest since H2 May 2025, outpacing rise in Group II heavy-grade price-premium.

·         Rebounding N150 price-premium adds to incentive for refiners to focus on maximising base oils output.

·         China’s domestic Group II N150 price-premium to Shandong diesel prices holds steady at low level, especially compared with year-earlier levels.

·         Steady price-premium follows surge in premium in early-Aug 2025, at a time when domestic demand typically gets boost from round of stock-replenishment.

·         Any extension of price-premium holding at current levels would point to relatively weak supply-demand fundamentals.

·         Dynamic would suggest seasonal rise in demand is weaker than usual.

·         CFR India Group II N70 price-premium to Singapore gasoil price extends rise to highest since end-May 2025.

·         Speed and strength of rebound in price-premium points to sufficiently-strong demand that counters impact of lower gasoil prices.

·         Higher N70 price-premium facilitates arbitrage to move more supplies to India, incentivizes Asia’s refiners to boost output of very-light grades.

·         Europe’s domestic Group I brightstock price-premium to vacuum gasoil (VGO) stays unusually high in Q3 2025.

·         Brightstock price-premium widens even more its gap vs Group I SN 500 and especially SN 150 price-premium.

·         High brightstock price-premium points to supply-demand fundamentals that remain as tight in Q3 2025 as earlier in the year, even at a time when demand faces seasonal slowdown.

·         US domestic Group II heavy-grade price-premium to VGO unusually rises more than rise in Group II light-grade premium to VGO.

·         US Group II heavy-grade price-premium to VGO falls more than light-grade-premium to VGO since peaking this year in early-May 2025.

·         Stronger rise in Group II heavy-grade price-premium to VGO in past week reverses that trend, at least temporarily.

·         Any extension of trend would add to incentive for refiners to maintain steady base oils output.