· Europe/Asia Group I/II base oil premium to diesel edges lower as outright prices fall.· Europe Group I premium to diesel relatively low vs Q2-Q3, firm historically.· Refiners incentivized to continue to focus on middle distillates production.· Base oils premium would need to be much higher to counter ongoing strength of diesel premium to crude.· Asia Group II premium to diesel holds close to highest since early August..· India’s domestic retail diesel premium to regional light-grade base oils prices holds steady, curbs incentive to boost light-grade imports.· Refiners using discounted crude of Russian origin enjoy larger diesel/base oil margins.· China domestic Group II N150 premium to Shandong diesel extends fall to lowest in a month..· Outright base oils price weakness reflective of current market, not market in one-to-two months’ time.· Supply-demand fundamentals in one to two months’ time likely to be firmer than in December.· Firmer supply-demand fundamentals in one-to-two months’ time would suggest current supply and prices provide attractive buying opportunity.· But falling base oils prices likely to continue to deter buyers and complicate sellers’ ability to clear supplies, adding to downward price pressure for now and size of subsequent price correction.· Asia Group I/II discount to Europe prices continues to narrow. Trend could complicate flow of Asia-Pacific Group I shipments to Mideast Gulf.· Rise in Russian shipments to Mideast Gulf likely to complicate arbitrage for Europe and Asia-Pacific supplies to move to that market.· Elevated US prices relative to other markets sustain attraction of moving arbitrage shipments to Americas market.· Europe Group II premium to Group I prices falls to narrowest in five months, reducing incentive for blenders to switch back to Group I.· Europe Group III premium to Group I/II widens amid tighter supply.· Blenders may have less flexibility to switch away from Group III because of formulation requirements.· Asia Group II premium to Group I base oils narrows further, increasingly close to parity.· Narrow price spread incentivizes blenders to use more Group II base oils.· Slumping domestic Chinese Group II light-grade prices complicate arbitrage to China for Asia shipments.· Chinese refiners' domestic Group II prices fall faster than domestic prices for imported supplies.· Widening discount of prices for domestic Chinese supplies to prices for imported supplies cuts attraction of overseas supplies.· Less attractive arbitrage likely to put pressure on Taiwan shipments to target other markets instead of China.· Price trends likely to help avoid supply-build in China, but leave it exposed to tightness if demand exceeds expectations.
· Europe/Asia Group I/II base oil premium to diesel edges lower as outright prices fall.· Europe Group I premium to diesel relatively low vs Q2-Q3, firm historically.· Refiners incentivized to continue to focus on middle distillates production.· Base oils premium would need to be much higher to counter ongoing strength of diesel premium to crude.· Asia Group II premium to diesel holds close to highest since early August..· India’s domestic retail diesel premium to regional light-grade base oils prices holds steady, curbs incentive to boost light-grade imports.· Refiners using discounted crude of Russian origin enjoy larger diesel/base oil margins.· China domestic Group II N150 premium to Shandong diesel extends fall to lowest in a month..· Outright base oils price weakness reflective of current market, not market in one-to-two months’ time.· Supply-demand fundamentals in one to two months’ time likely to be firmer than in December.· Firmer supply-demand fundamentals in one-to-two months’ time would suggest current supply and prices provide attractive buying opportunity.· But falling base oils prices likely to continue to deter buyers and complicate sellers’ ability to clear supplies, adding to downward price pressure for now and size of subsequent price correction.· Asia Group I/II discount to Europe prices continues to narrow. Trend could complicate flow of Asia-Pacific Group I shipments to Mideast Gulf.· Rise in Russian shipments to Mideast Gulf likely to complicate arbitrage for Europe and Asia-Pacific supplies to move to that market.· Elevated US prices relative to other markets sustain attraction of moving arbitrage shipments to Americas market.· Europe Group II premium to Group I prices falls to narrowest in five months, reducing incentive for blenders to switch back to Group I.· Europe Group III premium to Group I/II widens amid tighter supply.· Blenders may have less flexibility to switch away from Group III because of formulation requirements.· Asia Group II premium to Group I base oils narrows further, increasingly close to parity.· Narrow price spread incentivizes blenders to use more Group II base oils.· Slumping domestic Chinese Group II light-grade prices complicate arbitrage to China for Asia shipments.· Chinese refiners' domestic Group II prices fall faster than domestic prices for imported supplies.· Widening discount of prices for domestic Chinese supplies to prices for imported supplies cuts attraction of overseas supplies.· Less attractive arbitrage likely to put pressure on Taiwan shipments to target other markets instead of China.· Price trends likely to help avoid supply-build in China, but leave it exposed to tightness if demand exceeds expectations.
