Global base oils margins outlook: Week of 5 May

·         Global base oils prices extend rise vs feedstock/competing fuel prices.

·         Outright prices mostly hold firm or rise even in face of ongoing dip in crude oil/diesel prices.

·         Contrasting trends point to stronger base oils fundamentals relative to crude/diesel.

·         Signs of muted-to-weak base oils demand in growing number of markets point to supply as key factor supporting firm margins.

·         Dynamic suggests any improvement in supply could have more marked impact on margins.

·         Asia’s base oils price premium to Singapore gasoil extends rise.

·         FOB Asia Group I base oils price premium rises, stays well above year-earlier levels for all grades, especially heavier grades.

·         Rising price premium points to firm supply-demand fundamentals, incentivizing refiners to raise output.

·         Sustained strength of base oils premium points to insufficient market supply even with incentive to raise output.

·         Sustained strength of base oils premium could instead put pressure on adjustment in demand in order to ease tight market fundamentals.

·         China’s Group II base oils price premium to Shandong diesel prices extends rise.

·         Rising base oils price premium points to firm supply-demand fundamentals, incentivizes refiners to maintain or raise output.

·         Higher output increases importance of firm demand to absorb additional supplies.

·         Higher output, combined with any demand weakness, raises risk of rise in surplus supply.

·         CFR India Group II N70 premium  to Singapore gasoil stays unusually high.

·         High premium points to firm supply-demand fundamentals.

·         High premium facilitates arbitrage to move more supplies to India.

·         High premium incentivizes overseas refiners to boost output of very-light grade base oils.

·         Europe Group II base oils price premium to VGO rises to highest since end-Q3 2024.

·         Group II price premium stays well above year-earlier levels, despite lower supply because of plant maintenance at end-Q1/early Q2 2024.

·         Strength of Group II prices points to firm supply-demand fundamentals, incentivizing rise in supply from domestic and overseas sources.

·         Any such rise in requirements could provide valuable outlet for US supplies, especially of heavy grades.

·         US Group II price premium to VGO rises, with domestic light grades climbing in recent weeks at faster pace than other grades.

·         Firmer Group II light-grade premium stays well above year-earlier levels.

·         Dynamic points to supply-demand fundamentals that are at least as strong as year-earlier levels.

·         Increasingly firm margins incentivize refiners to boost base oils output, especially relative to other products like diesel.