· Seasonal slowdown in demand keeps pressure on outright base oils prices in key outlets like China, India and Middle East.· CFR India Group II price differential to FOB NE Asia prices stays narrow, reflecting the weaker demand in recent months.· But India price premium extends gradual recovery since early-June 2024.· Domestic China Group II price differential to FOB NE Asia prices stays unusually weak, reflecting the weak demand.· But price differential starts to rise in recent weeks from lowest since H2 2022.· Gap between base oils prices in FOB Asia markets and in destination markets stays narrow, keeping arbitrages hard to work.· But a reversion to a widening spread between FOB and CFR prices suggests that demand in those markets is starting to bottom out.· An extension of that trend over the coming weeks would start to make more feasible the arbitrage later in Q3 2024.· The timing would provide buyers in those markets with time to work down existing stocks.· The timing would coincide with a seasonal pick-up in demand at end-Q3/early Q4 2024, and with buyers’ need to lock in supplies beforehand.· CFR India Group II N150 price reverts to premium to FOB NE Asia price from end-June 2024..· Slide in CFR India N150 premium to FOB NE Asia price from end-March 2024 coincided with delivery of swathe of base oils into India during Q2 2024..· Shipments trigger surge in India’s surplus base oils supply, curbing subsequent demand.· Arbitrage to India stays hard to work even as CFR India N150 premium to FOB NE Asia price starts to widen.· An extension of this widening trend over the coming weeks would make the arbitrage more feasible and trigger a subsequent improvement in demand..· China’s domestic Group II base oils prices hold firm vs Shandong diesel prices in recent weeks..· Steady price premium to diesel contrasts with sharp fall in FOB NE Asia Group II premium to gasoil in June and early-July 2024..· China’s domestic Group II light-grade price premium to FOB NE Asia Group II prices starts to widen from late-May 2024.· Premium had previously narrowed steadily from Jan 2024, incentivizing regional refiners to move more shipments to other markets instead of China.· Steady Group II price premium to diesel and widening premium to FOB NE Asia prices points to change in China’s fundamentals compared with Asia market.· Any extension of the trend could start to boost the attraction of moving more shipments to China..· An extension of these trends over the coming weeks in China and India would make the arbitrage more feasible.· Any opening of the arbitrage later in Q3 2024 would coincide with preparations for and the start of plant maintenance work in South Korea at end-Q3 2024.· A simultaneous opening of the arbitrage to several key markets would boost demand at the same time as plant maintenance trims supply..Global base oils margins outlook: Week of 8 July.Asia base oils demand outlook: Week of 8 July.Asia base oils supply outlook: Week of 8 July
· Seasonal slowdown in demand keeps pressure on outright base oils prices in key outlets like China, India and Middle East.· CFR India Group II price differential to FOB NE Asia prices stays narrow, reflecting the weaker demand in recent months.· But India price premium extends gradual recovery since early-June 2024.· Domestic China Group II price differential to FOB NE Asia prices stays unusually weak, reflecting the weak demand.· But price differential starts to rise in recent weeks from lowest since H2 2022.· Gap between base oils prices in FOB Asia markets and in destination markets stays narrow, keeping arbitrages hard to work.· But a reversion to a widening spread between FOB and CFR prices suggests that demand in those markets is starting to bottom out.· An extension of that trend over the coming weeks would start to make more feasible the arbitrage later in Q3 2024.· The timing would provide buyers in those markets with time to work down existing stocks.· The timing would coincide with a seasonal pick-up in demand at end-Q3/early Q4 2024, and with buyers’ need to lock in supplies beforehand.· CFR India Group II N150 price reverts to premium to FOB NE Asia price from end-June 2024..· Slide in CFR India N150 premium to FOB NE Asia price from end-March 2024 coincided with delivery of swathe of base oils into India during Q2 2024..· Shipments trigger surge in India’s surplus base oils supply, curbing subsequent demand.· Arbitrage to India stays hard to work even as CFR India N150 premium to FOB NE Asia price starts to widen.· An extension of this widening trend over the coming weeks would make the arbitrage more feasible and trigger a subsequent improvement in demand..· China’s domestic Group II base oils prices hold firm vs Shandong diesel prices in recent weeks..· Steady price premium to diesel contrasts with sharp fall in FOB NE Asia Group II premium to gasoil in June and early-July 2024..· China’s domestic Group II light-grade price premium to FOB NE Asia Group II prices starts to widen from late-May 2024.· Premium had previously narrowed steadily from Jan 2024, incentivizing regional refiners to move more shipments to other markets instead of China.· Steady Group II price premium to diesel and widening premium to FOB NE Asia prices points to change in China’s fundamentals compared with Asia market.· Any extension of the trend could start to boost the attraction of moving more shipments to China..· An extension of these trends over the coming weeks in China and India would make the arbitrage more feasible.· Any opening of the arbitrage later in Q3 2024 would coincide with preparations for and the start of plant maintenance work in South Korea at end-Q3 2024.· A simultaneous opening of the arbitrage to several key markets would boost demand at the same time as plant maintenance trims supply..Global base oils margins outlook: Week of 8 July.Asia base oils demand outlook: Week of 8 July.Asia base oils supply outlook: Week of 8 July