Global base oils margins outlook: Week of 21 April

·         Global base oils prices stay firm vs feedstock/competing fuel prices.

·         Firm base oils margins point to tight supply and strong demand.

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

·         Base oils demand would need to hold firm or rise to absorb steady or higher output.

·         Any slowdown in demand could by contrast speed up pick-up in surplus supplies.

·         FOB Asia base oils prices edge down vs Singapore gasoil prices.

·         Base oils price-premium to gasoil remains unusually high for heavy-grade base oils.

·         High base oils premium suggests supply-demand fundamentals stay unusually strong for Group I and Group II base oils.

·         High base oils premium incentivizes refiners to maximise heavy-grade output.

·         Any moves to maximise output could speed up rise in surplus volumes if supply-demand fundamentals start to weaken.

·         High base oils premium coincides with expected completion of some Group II plant maintenance work in H2 April 2025.

·         China’s domestic Group II price light/heavy-grade price premiums to Shandong diesel price hold steadier at relatively firm levels, especially for heavy grades.

·         Recent price-strength points to firm supply-demand fundamentals.

·         Any easing of supply-demand fundamentals could remove underlying support for that price strength.

·         China’s base oils supply likely to improve following completion of plant maintenance work in May 2025.

·         CFR India Group II N70 price premium to Singapore gasoil falls from seven-month high.

·         Still-high premium keeps arbitrage open, incentivizes overseas refiners to produce more very-light grades for base oils market.

·         High premium and lower crude oil prices could prompt buyers in India to hold back in anticipation of further price correction.

·         Any such drop in outright prices could then support stronger domestic demand.

·         Europe’s Group III 4cSt base oils price premium to VGO extends rise to highest this year.

·         Group III price premium mirrors recent rise in Group II N150 price premium to VGO.

·         Group II N150 price premium remains in relatively narrow long-term range even with recent rise in premium.

·         Rise in Group III 4cSt premium follows sustained slide since mid-2023 and especially since Sept 2024.

·         Rise in Group III 4cSt premium points to signs that sustained slide has bottomed out.

·         US domestic Group II base oils price premium to VGO holds well above recent range.

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

·         Premium stays higher at time of year when it often gets boost from stronger supply-demand fundamentals.

·         Recent rise in premium instead coincides with signs of weaker-than-usual supply-demand fundamentals for the time of year.

·         Recent rise in premium likely reflects more this month’s sharp drop in crude oil prices.

·         Rise in premium because of lower crude prices rather than improved fundamentals could speed up build-up of surplus supplies.