US Group II base oil margins over feedstocks and competing fuels fell during the week ended 4 October on lower base oil demand and higher feedstock costs.
The Argus domestic spot US Group II N100 premium to four-week average low-sulphur (VGO) fell to $1.51/USG from $1.57/USG the prior week. Margins remained above year-earlier levels of $1.25/USG.
The Argus domestic spot US Group II N100 premium to four-week average US Gulf coast diesel was $1.31/USG, down from $1.37/USG the prior week. Margins were above year-earlier levels of 51¢/USG.
US Group II spot prices extended their fall amid growing supplies and weak demand.
Some refiners have continued to release a portion of their hurricane inventories into the domestic spot market to avoid higher inventory costs at the end of the fourth quarter. This is lengthening the domestic Group II market as some refiners are working to limit offers into the lower-priced export market.
Virgin Group II low-viscosity grades remain limited, but available re-refined grades are outweighing any upward price pressure from persistent supply tightness. Supplies of N220 are ample while N600 supplies are balanced-to-long.
Four-week average feedstock VGO prices rose alongside higher crude values. The low-sulphur VGO premium to four-week average WTI crude widened to $9.48/bl from $9.18/bl last week.
Weak competing fuel margins, especially for diesel, continue to incentivize refiners to direct more VGO toward base oil output. This has kept base oil production elevated despite thinner margins.
