Global base oils margins outlook: Week of 7 July

·         Global base oils values mostly hold firm versus feedstock/competing fuel prices, even as they remain down from recent highs in Q2 2025.

·         Firm base oils margins coincide with strong diesel premium to crude oil that incentivizes refiners to boost output of the motor fuel.

·         Any such move would likely impact light-grade base oils more than heavy grades, whose firm margins incentivize refiners to maintain high output of the product.

·         Base oils margins mostly hold firm at a time of year when demand faces a seasonal slowdown in all the key consumption markets over the coming weeks.

·         FOB Asia base oils price-premium to Singapore gasoil edges lower, holding well below recent highs in April-May 2025.

·         Lower price-premium could have more impact on light grades, especially Group I base oils, whose price-differential barely maintains premium to gasoil.

·         Recent strength of diesel price relative to crude could add to pressure on light grades by incentivizing refiners to produce more of the motor fuel instead.

·         China’s domestic Group II N150 price premium to Shandong diesel prices stays close to multi-month low.

·         Price-premium stays low at time of year when demand faces seasonal slowdown, while supply is likely to rise.

·         Low price-premium contrasts with surge in domestic price-premium of imported N150 base oils over Shandong diesel prices.

·         Rising premium points to firmer fundamentals for imported supplies.

·         Dynamic points to diverging fundamentals for domestic and imported supplies.

·         India’s CFR Group II N70 price-premium to Singapore gasoil price steadies at firm level, even if down from recent highs in three months to end-May 2025.

·         Lack of recovery to those recent highs could reflect weaker fundamentals at a time when demand usually faces seasonal slowdown and supply is likely to rise.

·         Price-premium holds at level that supports arbitrage shipments to India and incentivizes Asia refiners to maintain higher output of very-light grades.

·         Europe’s Group II base oils price-premium to vacuum gasoil (VGO) extends rise, especially for heavy grades.

·         Group II price-premium to VGO rises faster than other base oils grades in Europe, and faster than Group II base oils in other regions.

·         Outperformance of Group II price-premium points to increasingly firm supply-demand fundamentals.

·         Outperformance of Group II base oils incentivizes regional refiners to boost output of the grade, and overseas refiners to move more shipments to Europe.

·         US Group II export base oils price-premium to VGO holds steady at start of Q3 2025.

·         Steady price-differentials contrasts with ongoing rise in Group II price-premium in Q3 2024.

·         Steadier price-differentials coincide with feasible arbitrage to markets like Europe and India, especially for heavy grades.

·         Steadier price-differentials could reflect benefit of feasible arbitrage that helps to keep domestic supplies more balanced.

·         Any rise in price-differentials to VGO, or a less feasible arbitrage, could change those dynamics that support more balanced supplies.