Global base oils – week of Jul 4: Price outlook

· Strong diesel premium to crude sustains upward pressure on base oil prices amid signs refiners targeting more middle distillates output.

· Europe base oils vs outright diesel hold firm vs early 2022, weak vs 2021, weak vs diesel crack.

· Asia Group II base oil prices vs outright diesel edge higher, stay unusually low, incentivize refiners to produce no more than contract volumes.

· India retail diesel prices weaken further vs light-grade base oil prices to unusually narrow levels.

· Light-grade base oil prices had previously got support when diesel prices were firmer. That support now less likely.

· Europe/Asia Group I heavy-grade prices vs light grades stay wider than usual, support margins.

· Europe Group II heavy neutrals premium vs light grades stays wide, even if narrower than in 2021.

· Asia Group II heavy neutrals premium vs light grades stays narrow, adding to pressure on margins.

· Europe Group II vs Group I holding firm, even if lower than early 2022, 2H 2021.

· Europe Group III prices stay weak vs Group I and Group II light grades, incentivizing consumption of more Group III.

· Asia Group II light-grade prices hold unusually firm vs Group I light grades, incentivizing switch to Group I.

· Asia Group II heavy-neutrals prices maintain steady/more typical premium to Group I heavy neutrals.

· Asia Group I/Group II price discount to Europe prices stays unusually wide, incentivizes moves to line up more arbitrage shipments.

· Domestic Chinese prices show scant pick-up in strength vs fob Asia prices following recent easing of lockdown measures.

· Asia Group I/ Group II prices stay unusually strong vs domestic Chinese prices.

· Strong Asia Group I/Group II prices vs China prices incentivize regional sellers/Chinese term buyers to continue to redirect shipments to other markets.