In today’s briefing:
- BoE: Policy Mistake Diagnosis
- US: Rate Cut Imminent at Last, but Chances of More Are Slim as Oil’s Benefits Fade
- A Review of Korea Small Cap Gem Series So Far in 2025 and Small Caps as Important Market Indicator
- Asia base oils supply outlook: Week of 11 August
- Americas/EMEA base oils supply outlook: Week of 11 August
- Global base oils margins outlook: Week of 11 August
- Global base oils arb outlook: Week of 11 August
- Asia base oils demand outlook: Week of 11 August
- Americas/EMEA base oils demand outlook: Week of 11 August
BoE: Policy Mistake Diagnosis
- Inflation expectations have been persistently too high, while productivity trends poorly, driving wage and price inflation forecasts to grind higher in recent years.
- The BoE’s cutting cycle contributed to reversing the trend decline in expectations, and in turning a slight overshoot into a massive one, with a 3.2pp revision since Feb-23.
- We forecasted this excess for these reasons, so it was predictable and therefore a policy mistake to cut so soon. Further surprise should prevent the MPC from cutting again.
US: Rate Cut Imminent at Last, but Chances of More Are Slim as Oil’s Benefits Fade
- With CPI inflation at 2.7%YoY in Jun-Jul’25, and PCE inflation at 2.6% in June, a belated rate cut is highly probable at the next FOMC meeting in Sep’25.
- Declining oil prices (-9.5%YoY in Jul’25) were a major factor enabling headline inflation to stay well-contained, alongside mild M2 growth (just +4.7%YoY as of Jun’25).
- Base effects will cease to be helpful after Oct’25, as oil prices had declined from Nov’24. Tariffs pushing headline PCE inflation toward 3%YoY will preclude further rate cuts.
A Review of Korea Small Cap Gem Series So Far in 2025 and Small Caps as Important Market Indicator
- In this insight, we review the relative performances of the 11 Korea Small Cap Gem series published so far in 2025 (as of 13 August).
- We also argue how small caps could be one of the important indicators in the Korean stock market.
- These 11 stocks are up on average 32.9% (from date of the Korea Small Cap Gem series publication to 13 August 2025).These 11 stocks have significantly outperformed KOSPI and KOSDAQ.
Asia base oils supply outlook: Week of 11 August
- Asia’s heavy-grade base oils price-premium to Singapore gasoil holds firm in narrow range, even if down from highs in Q2 2025.
- Firm premium sustains incentive for refiners to maintain high output of heavy grades even amid signs of rise in surplus supply.
- FOB Asia Group II heavy-grade price discount to CFR UAE prices rises to highest in more than a year.
Americas/EMEA base oils supply outlook: Week of 11 August
- US Group II light-grade export-price premium to vacuum gasoil holds close to lows in Q1 2025.
- Lower base oils margins and drop in outright export prices suggest recent tightness of light-grade supplies is easing.
- Drop in export prices facilitates removal of any such surplus volumes, keeping fundamentals balanced for longer in domestic market.
Global base oils margins outlook: Week of 11 August
- Global base oils margins stay more mixed but mostly hold at levels that sustain incentive for refiners to maintain firm output of the lubricants feedstock.
- Fob Asia light-grade base oils price-premium to Singapore gasoil extends rise, while heavy-grades stay more rangebound.
- FOB Asia Group II light-grade price-premium to gasoil rises to highest since H1 June 2025.
Global base oils arb outlook: Week of 11 August
- US Group III 4cSt base oils price-premium to Group II light grades falls at end-July for first time in three months, before extending dip in August 2025.
- Asia’s Group III 4cSt (low) price-premium to Group II light grades starts trending lower from late-June 2025.
- Europe Group III 4cSt (low) price-premium to Group I and Group II light grades continues to edge higher after protracted slump since early-2023.
Asia base oils demand outlook: Week of 11 August
- Asia’s base oils demand could get support from moves to replenish stocks that were more balanced than expected at start of Q3 2025.
- Blenders could be targeting additional supplies to cover seasonal rise in consumption in final weeks of Q3 2025.
- Stocks could be more balanced than expected because of unusually strong rise in demand at end-Q2 2025.
Americas/EMEA base oils demand outlook: Week of 11 August
- US base oils demand likely to stay muted.
- Expectations of growing surplus supplies boost attraction of maintaining lower stocks and procuring smaller top-up volumes more frequently.
- Buyers could seek to maintain sufficient volumes to cover any supply-disruptions as market heads into time of year when Atlantic hurricane activity typically peaks.
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