Global base oils margins outlook: Week of 24 March

·         Global base oils prices mostly weaken vs higher feedstock/competing fuel prices.

·         Lower prices of light-grade base oils relative to heavy-neutrals leave those supplies more exposed to impact of higher feedstock costs at a time when demand faces seasonal rise.

·         FOB Asia base oils prices fall vs Singapore gasoil.

·         Group I/II light-grade base oils price premium to gasoil slips to levels that cut attraction of producing more of those supplies.  

·         Light-grade premium falls at a time of year when it typically rises.

·         Light-grade premium stays low even with ongoing round of plant maintenance and seasonally-firmer demand.

·         Domestic China Group II N150 premium to Shandong diesel prices extends rise to highest since early-Jan 2025.

·         Rising N150 premium to diesel in March 2025 follows similar trend in March 2024; premium then peaked in early May 2024.

·         Premium rises at time of year when lube consumption typically gets seasonal boost.

·         Rising premium coincides with domestic plant maintenance work.

·         Rising N150 premium contrasts with more rangebound N500 premium to Shandong diesel in March 2025.

·         CFR India Group II N70 premium to Singapore gasoil price edges lower, holds close to highest since end-Q3 2024.

·         Firm premium facilitates arbitrage to move more very-light grades to India, incentivizes regional refiners to boost supply of very-light grade base oils.

·         Rebounding premium in Feb-March 2025 follows slump in India’s imports of very-light grade base oils in Feb 2025 to lowest since Q3 2023.

·         Europe’s domestic brightstock price premium to VGO edges higher.

·         Rising premium contrasts with lower price premium to VGO for all other base oils grades.

·         Trend reflects sustained outperformance of brightstock vs other Group I and premium-grade base oils and vs other regions.

·         Sustained brightstock price-strength points to structural supply shortfall until demand eases or availability improves in other regions.

·         US Group II export price-premium to VGO continues to stay in narrow range so far this year.

·         Steady base oils premium contrasts with slump in premium in early-2024, before rebound in premium from H2 March 2024 to end-Q3 2024.

·         Premium rebounds from H2 March 2024 in response to tighter supply-demand fundamentals from end-Q1 2024.

·         Any repeat of those price dynamics in coming weeks would point to similar tightening of supply-demand fundamentals.

·         Lack of any such repeat of those price dynamics in coming weeks would point to supply-demand fundamentals that are different from this time last year.