Global base oils – week June 6: Price outlook

· Diesel premium to crude stays strong.

· Strong diesel premium sustains upward pressure on base oil prices.

· US base oil values vs diesel stay lower than at start of year.

· Europe Group I base oil prices struggle to keep pace with diesel, stay above long-term trend, far below 2021 levels.

· Asia Group II prices stay weak vs diesel, even if well above March-April levels.

· India retail diesel premium to Asia light-grade prices falls to less than $100/t, from more than $600/t in Q3 2021.

· Domestic China light grades maintain small premium to diesel.

· Europe Group II heavy-grade premium to Group I trending narrower; still much firmer than usual.

· Europe Group III premium to Group I light grades holding close to narrowest in 10 months.

· Europe Group III premium vs Group II holding close to narrowest in 10 months.

· Asia Group I/II discount to Europe prices widens further.

· Even if Asia Group I/II supplies don’t move to Europe, they are attractive for buyers that typically procured supplies from Europe.

· Fob Asia Group I/II premium to domestic Chinese prices widens further.

· Closed arbitrage to China complicates response to any pick-up in Chinese demand.

· Prices incentivize Asia producers to target Americas/Europe rather than regional markets.