Global base oils margins outlook: Week of 23 June

·         Global base oils prices extend fall vs competing/feedstock prices following surge in crude oil prices.

·         Rising diesel premium to crude oil magnifies pressure on base oils prices.

·         Speed of fall in base oils price differentials suggests surge in crude prices rather than weaker supply-demand fundamentals is key factor driving lower margins.

·         Any extension of base oils margins holding at lower levels would point to weaker supply-demand fundamentals also being a factor, limiting refiners’ leverage to adjust prices in response.  

·         FOB Asia base oils price-premium to Singapore gasoil extends fall.

·         FOB Asia Group I SN 150 price-differential to gasoil falls to discount for first time since Jan 2025.

·         FOB Asia Group II N150 premium to gasoil falls to lowest since Jan 2025 even after rise in outright prices.

·         Low price differentials incentivize refiners to cut output of light-grade base oils.

·         Domestic China N150 price premium to Shandong diesel prices stays low even as it rises from lowest in almost four months.

·         Still-low base oils price-premium likely to incentivize domestic refiners to focus on producing more diesel.

·         Outright base oils prices would need to extend rise to reverse that dynamic.

·         Lack of any such trend would point to weaker supply-demand fundamentals.

·         CFR India Group II N70 price-premium to Singapore gasoil extends slide to lowest level in more than five months.

·         Price-premium falls by more than $100/tonne so far in June 2025.

·         Speed of fall in price-premium complicates sales and procurement plans, closes arbitrage and incentivizes overseas refiners to produce more diesel instead.

·         Price-premium could face sustained pressure as buyers’ existing stocks and seasonal slowdown in demand curb pressure for them to accept higher prices.

·         Europe’s Group II heavy-grade price-premium to vacuum gasoil (VGO) falls to lowest since H1 April 2025.

·         Group II heavy-grade premium falls less steeply than Group II light-grade premium and Group I heavy-neutrals premium to VGO.

·         Smaller fall in Group II heavy-grade premium to VGO contrasts with steeper fall in Asia Group II heavy-grade premium to gasoil vs light grades.

·         Dynamic points to firmer supply-demand fundamentals for Group II heavy grades in Europe, and firmer fundamentals for light grades in Asia.

·         US Group II base oils export price-premium to VGO falls to lowest since early-April 2025.

·         US Group II export price-premium falls less steeply than fall in Group II domestic price-premium to VGO.

·         Fall in Group II export price-premium to VGO contrasts with sustained surge in export price-premium to VGO this time a year earlier, from end-March 2024 to H1 Sept 2024.

·         Any extension of trend would point to weaker supply-demand fundamentals in Q2 2025 than during same period last year.