Global base oils margins outlook: Week of 19 May

·         Global base oils prices hold firm vs feedstock/competing fuel prices even as they edge lower.

·         Firm base oils values point to tight supply-demand fundamentals, incentivize refiners to maintain high output.

·         Base oils values hold firm ahead of typical seasonal slowdown in demand in coming weeks in Asia, and from start of Q3 in Europe/US.

·         High base oils margins and prospect of seasonal slowdown in demand could trigger disconnect between supply and demand.

·         FOB Asia base oils values mostly hold firm, especially for heavy grades, even as they edge lower vs Singapore gasoil.

·         FOB Asia Group I SN 150 premium to gasoil stays well above year-earlier levels even as it slips from seven-month high in early-May 2025.

·         FOB NE Asia Group II N150 premium to gasoil falls more steeply than Group I SN 150 and increasingly lags year-earlier levels.

·         Dynamic points to weaker supply-demand fundamentals for Group II light grades than Group I light grades.

·         Even so, Group II premiums to gasoil remain at levels that continue to incentivize refiners to maintain or raise output.

·         China’s domestic Group II light/heavy-grade price premium to Shandong diesel prices stay unusually firm and well above year-earlier levels.

·         Firm domestic base oils premium incentivizes domestic refiners to maintain or raise base oils output.

·         Incentive to maintain or raise base oils output coincides with completion in May 2025 of round of plant maintenance work and precedes seasonal slowdown in demand.

·         CFR India Group II N70 premium to Singapore gasoil holds firm even as it edges lower.

·         N70 premium held at similar level the same time a year ago before slumping from end-May 2024.

·         Higher-than-usual premium points to sustained buying interest in India combined with balanced-to-tight supplies since early-March 2025.

·         Higher-than-usual premium keeps open the arbitrage to move more very-light grade supplies from Asia to India.

·         Europe’s Group I domestic base oils prices hold firm vs VGO even as they edge lower.

·         Group I light and heavy-neutrals premium holds at similar levels to same time a year earlier, while brightstock stays much higher.

·         Relatively steady Group I price premium contrasts with sharper fall in Group II/Group III price premium to VGO.

·         Dynamic could reflect tighter supply-demand fundamentals for Group I base oils compared with premium-grade base oils.

·         US Group II price premium to VGO falls, especially for domestic heavy grades.

·         Lower Group II price premium contrasts with rising price premium this time a year ago, especially for export prices.

·         Any extension of drop in price premium would point to diverging supply-demand fundamentals this year vs same time last year.

·         Even so, Group II price premiums remain at levels that incentivize refiners to maintain or increase base oils output.