· Europe/Asia base oils prices rise relative to lower outright diesel prices.· Asia Group II prices maintain premium to diesel since early February, vs steep discount to diesel in January.· Europe Group II premium to diesel holds close to lowest in a year.· Base oil values get boost more from lower crude/gasoil prices than from rise in outright prices.· Muted rise in outright prices contrasts with typical strong rise in prices at end of first quarter of each year when supply-demand fundamentals tighten..· India’s retail diesel premium to regional light-grade prices edges lower; trend could start to deter imports of very light grades.· China’s domestic Group II light-grade premium to Shandong diesel prices holds firm, well up from January lows, still down from peak levels in 2H November..· China’s domestic base oils prices/premium to fob Asia prices hold in narrow range, differ markedly from wide-open arbitrage to China in 1H 2020 and surging heavy-grade prices in 1H 2021.· Globally, buyers’ expectations that prices will hold in a narrow range or rise only slowly curb urgency to lock in supplies.· European price weakness at end-2022 and through Q1 2023 suggests change in typical procurement trends as buyers hold off replenishing stocks or procure smaller volumes more regularly.· Change in procurement trends magnifies demand weakness.· A change in procurement trends would incentivize producers to adjust their production/sales plans accordingly to maintain steady supply/avoid supply-build.· Surge in US base oils/lube stocks at end-2022 highlight impact of prices that complicate removal of surplus supplies.· Surge in US base oils exports in January adds to supply and price-pressure in short term.· More balanced supplies following rise in exports highlight benefit of prices that facilitate removal of surplus supplies and avoidance of stock-build.· February-loading shipment of Group II heavy grades from Taiwan to northwest Europe coincided with steep Europe Group II heavy-grade premium to fob Asia prices.· Europe Group II premium to fob Asia prices narrows by more than $200/t since early February – making arbitrage less attractive.· Europe Group II light-grade premium to fob Asia prices narrows more than $250/t since early February, making arbitrage even less feasible.· Weaker Europe Group II prices narrow premium to US prices, complicating arbitrage, especially for heavy grades.· Stronger regional Group II demand in Asia/China reduces impact of less workable arbitrage to Europe.· Any sign of weaker-than-expected Group II demand in Asia/China would increase importance of open arbitrage to Europe.· Asia Group II heavy-grade discount to US prices stays wide – sustaining arbitrage for moving that product to Americas.· Europe’s Group I prices strengthen relative to fob Asia prices – reflecting firming prices/fundamentals in Europe.· Firmer Europe prices make less feasible the arbitrage to move surplus supplies to markets like Mideast Gulf or Latin America.· Firmer Europe Group I prices could boost attraction of moving Russian supplies to Latin America.· Europe Group II price premium to Group I prices falls sharply in recent weeks to narrowest since first-half 2021.· Narrow premium boosts attraction for blenders to use Group II instead of Group I.· Steep premium of Europe Group II prices to Group I since 2021 could deter blenders that are wary that the currently-narrow premium will widen again.· Narrow Group II premium to Group I could attract blenders that have flexibility to switch with relative ease between Group I and Group II base oils.· Europe Group II heavy grades maintain steep premium to light grades, contrasting with narrow Group I light-heavy price spread.· Wider Group II light-heavy price spread could incentivize blenders to stick with Group I heavy neutrals.· Europe Group III premium to Group I prices widens to highest in more than four months.· Europe Group III premium to Group II prices widens to highest in more than two years.· Wide Group III premium to other grades incentivizes blenders to switch to other grades where possible.· Asia Group II N500 premium to N150 stays narrow – curbing any additional heavy-grades support for margins.· Asia Group II premium to Group I widens, especially for heavy grades, to highest in more than three months.· Asia Group II premium to Group I remains relatively narrow – at levels that are unlikely to encourage a switch to Group I.· Fob Asia Group I bright stock discount to domestic Chinese prices holds steady and narrow – making arbitrage hard to work unless domestic Chinese prices rise or fob Asia prices fall.· Fob Asia Group I bright stock prices are less likely to fall.· Fob Asia Group II discount to domestic Chinese prices narrows, making arbitrage hard to work for light and heavy grades.· Limited arbitrage opportunities suggest supply in China is sufficient to cover demand – despite low domestic base oils production in China..Global base oils – week of March 13: Demand outlook
· Europe/Asia base oils prices rise relative to lower outright diesel prices.· Asia Group II prices maintain premium to diesel since early February, vs steep discount to diesel in January.· Europe Group II premium to diesel holds close to lowest in a year.· Base oil values get boost more from lower crude/gasoil prices than from rise in outright prices.· Muted rise in outright prices contrasts with typical strong rise in prices at end of first quarter of each year when supply-demand fundamentals tighten..· India’s retail diesel premium to regional light-grade prices edges lower; trend could start to deter imports of very light grades.· China’s domestic Group II light-grade premium to Shandong diesel prices holds firm, well up from January lows, still down from peak levels in 2H November..· China’s domestic base oils prices/premium to fob Asia prices hold in narrow range, differ markedly from wide-open arbitrage to China in 1H 2020 and surging heavy-grade prices in 1H 2021.· Globally, buyers’ expectations that prices will hold in a narrow range or rise only slowly curb urgency to lock in supplies.· European price weakness at end-2022 and through Q1 2023 suggests change in typical procurement trends as buyers hold off replenishing stocks or procure smaller volumes more regularly.· Change in procurement trends magnifies demand weakness.· A change in procurement trends would incentivize producers to adjust their production/sales plans accordingly to maintain steady supply/avoid supply-build.· Surge in US base oils/lube stocks at end-2022 highlight impact of prices that complicate removal of surplus supplies.· Surge in US base oils exports in January adds to supply and price-pressure in short term.· More balanced supplies following rise in exports highlight benefit of prices that facilitate removal of surplus supplies and avoidance of stock-build.· February-loading shipment of Group II heavy grades from Taiwan to northwest Europe coincided with steep Europe Group II heavy-grade premium to fob Asia prices.· Europe Group II premium to fob Asia prices narrows by more than $200/t since early February – making arbitrage less attractive.· Europe Group II light-grade premium to fob Asia prices narrows more than $250/t since early February, making arbitrage even less feasible.· Weaker Europe Group II prices narrow premium to US prices, complicating arbitrage, especially for heavy grades.· Stronger regional Group II demand in Asia/China reduces impact of less workable arbitrage to Europe.· Any sign of weaker-than-expected Group II demand in Asia/China would increase importance of open arbitrage to Europe.· Asia Group II heavy-grade discount to US prices stays wide – sustaining arbitrage for moving that product to Americas.· Europe’s Group I prices strengthen relative to fob Asia prices – reflecting firming prices/fundamentals in Europe.· Firmer Europe prices make less feasible the arbitrage to move surplus supplies to markets like Mideast Gulf or Latin America.· Firmer Europe Group I prices could boost attraction of moving Russian supplies to Latin America.· Europe Group II price premium to Group I prices falls sharply in recent weeks to narrowest since first-half 2021.· Narrow premium boosts attraction for blenders to use Group II instead of Group I.· Steep premium of Europe Group II prices to Group I since 2021 could deter blenders that are wary that the currently-narrow premium will widen again.· Narrow Group II premium to Group I could attract blenders that have flexibility to switch with relative ease between Group I and Group II base oils.· Europe Group II heavy grades maintain steep premium to light grades, contrasting with narrow Group I light-heavy price spread.· Wider Group II light-heavy price spread could incentivize blenders to stick with Group I heavy neutrals.· Europe Group III premium to Group I prices widens to highest in more than four months.· Europe Group III premium to Group II prices widens to highest in more than two years.· Wide Group III premium to other grades incentivizes blenders to switch to other grades where possible.· Asia Group II N500 premium to N150 stays narrow – curbing any additional heavy-grades support for margins.· Asia Group II premium to Group I widens, especially for heavy grades, to highest in more than three months.· Asia Group II premium to Group I remains relatively narrow – at levels that are unlikely to encourage a switch to Group I.· Fob Asia Group I bright stock discount to domestic Chinese prices holds steady and narrow – making arbitrage hard to work unless domestic Chinese prices rise or fob Asia prices fall.· Fob Asia Group I bright stock prices are less likely to fall.· Fob Asia Group II discount to domestic Chinese prices narrows, making arbitrage hard to work for light and heavy grades.· Limited arbitrage opportunities suggest supply in China is sufficient to cover demand – despite low domestic base oils production in China..Global base oils – week of March 13: Demand outlook
