Asian Group II base oil premiums to Asian gasoil values have dropped steadily since early October, as gasoil prices rose.
Asian gasoil prices were higher in October and first-half November as compared with September, while Asian Group II light-grade base oil export prices remained relatively stable over the same period.
Asian N150 fob export prices were at a premium of $73/t to four-week Asian gasoil values in the week to 15 November, down from $79/t in the previous week. This is lower than the five-year average premium of $95/t. This comes as supply of the light grade is readily available in Asia.
But the Group II N500 premium to gasoil remains higher than usual despite recent declines, supported by limited supply of the heavy grade. Asian N500 fob export prices were at a premium of $278/t to four-week Asian gasoil values in the week to 15 November, down from $279/t in the previous week. But this remains higher than the five-year average premium of $214/t.
A relatively elevated premium of Group II N150 and a high premium of N500 over competing fuels will likely incentivise refiners to maintain high base oil production, despite recent drops.
Several Asian refiners have balanced Group II base oil inventories. These refiners have been prioritising supplying term volumes and are less active in offering spot cargoes. This has helped to stabilise Group II prices.
A South Korean refiner recently restarted its base oil unit, after a planned maintenance from mid-September to end October. Another South Korean refiner is building base oil inventories in preparation of a maintenance over March-April 2025.
