· Asia Group II base oil price premium to diesel rebounds by more than $220/t since early February to highest since last August.· Europe Group I base oil price premium to diesel rebounds by more than $250/t since January to highest since end-September.· Europe Group II base oils price premium to diesel rises from multi-year low in early March, still low vs past year..· Rebounding base oils premium to crude/diesel suggests firmer supply-demand fundamentals.· Rebounding base oils premium to crude/diesel suggests supply is tighter, incentivises refiners to produce more base oils.· Supply-demand fundamentals remain weaker than usual for time of year.· Rebounding base oils premium raises prospect of triggering rise in supply that outweighs demand.· China’s domestic light-grade Group II premium to Shandong diesel rises to highest in almost four months..· Rising base oils premium incentivizes China’s refiners to raise base oils output that has been unusually low over past year.· Europe’s Group II premium to fob Asia prices stays narrower, likely deterring additional arbitrage flows from Asia.· Europe’s Group II premium to US prices stays narrower, complicating flow of shipments from US.· Europe’s domestic/export Group I premium to fob Asia prices steadies at higher levels than Jan-Feb 2023, lower levels than 2H 2022 – pointing to more balanced supply/less urgency to move arbitrage shipments from Europe.· Europe’s steep Group III premium to Group I/II base oils reflects supply tightness at start of year.· Europe Group III premium to Group I/II could face pressure on signs of easing supply tightness.· Europe Group III premium could face pressure as price incentivizes blenders to switch to Group I/Group II/PAO.· Narrower Europe Group II premium to Group I could incentivize blenders to switch to Group II.· Narrowing Group II premium to Group I has precedent – Asia Group II prices were previously at steep premium to Group I. Asia Group II premium is now consistently much narrower.· Fob Asia Group II premium to Group I stays wider than at start of year, but narrower than usual.· Narrow premium incentivizes blenders to stick with Group II.· Fob Asia Group II heavy-grade prices maintain steep discount to US prices, sustain feasibility of moving arbitrage shipments to Americas.· Fob Asia Group II discount to domestic Chinese prices holds in narrow range – wider than pre-Oct 2022 levels, narrower than Nov-Dec 2022 levels.· Lack of steep rise in domestic Chinese price premium to fob Asia prices suggests supply-demand fundamentals remain balanced.· Domestic Chinese Group II prices hold relatively steady even as domestic demand rises, and as South Korean base oils exports to the country surge.· Trend points to stronger but not surging Chinese demand for overseas supplies.· Trend points to plentiful South Korean supply, curbing leverage to target higher prices..Global base oils – week of March 20: Supply outlook
