Global base oils – week of Nov 14: Price outlook

·        Asia Group II values vs gasoil improve, stay negative; Europe Group II values hold firm, even if lower than 1H 2022.

·        High diesel price/premium to crude provides higher floor-price for light-grade base oils.

·        India’s retail diesel premium to regional Group II light-grade prices holds steady, lower than 2021, maintaining narrow range since August.

·        China’s Group II light-grade premium to diesel extends rise to highest in more than a year, incentivizing refiners to raise base oils output.

·        US Group II posted prices hold firm vs heating oil – down from 3Q, up from 1H 2022.

·        Asia Group I price discount to Europe prices stays close to narrowest since 1Q 2022, still wide.

·        Asia Group I discount to Europe prices makes European cargoes less competitive for arbitrage to Mideast Gulf, India.

·        Asia Group II discount to Europe prices close to narrowest since 1Q 2022, still much wider than usual.

·        Asia/Mideast Gulf Group II arbitrage to Europe stays feasible, especially Mideast Gulf supplies with shorter journey.

·        Asia Group II discount to US prices stays unusually wide, keeps arbitrage attractive.

·        Europe Group II heavy-grade prices stay at discount to US prices, complicating arbitrage.

·        Trend suggests Europe prices need to rise, or US prices need to fall.

·        Europe Group II premium to Group I narrows, still wider than usual.

·        Europe Group II premium to Group I likely to face pressure as low demand, growing resistance to higher prices prompt blenders to use the lower-priced product.

·        Asia Group II premium to Group I stays narrow, boosting attraction of Group II.

·        Asia’s narrow Group II premium to Group I, Europe’s wide Group II premium to Group I highlight Asia’s larger supply of Group II, Europe’s larger supply of Group I.

·        Domestic Chinese Group II light-grade prices extend sharp rise in 1H November as low production and imports keep supply tight.

·        Domestic Chinese prices move to unusual premium to domestic prices for imported supplies.

·        Lack of price response for imported supplies is unusual, suggests priority is to secure deals.

·        Domestic Chinese Group II light-grade prices move to widest premium to Asia-Pacific cargo prices in more than a year.

·        Domestic Chinese Group I prices move to widening premium to Asia-Pacific cargo prices.

·        Tighter Asia Group I supply, firmer Chinese prices likely to support regional Group I prices.