Global base oils – week of July 25: Price outlook

· Diesel premium to crude stays higher than usual.

· High diesel premium to crude incentivizes refiners to prioritize middle distillates output.

· Outright base oils prices hold steady/fall more slowly than diesel prices.

· Base oils premiums to diesel hold firm/rise.

· Base oils premium to diesel now historically high - based on diesel premium to crude at historical levels.

· Base oils premium to diesel remains under pressure in view of diesel premium to crude at unusually high levels.

· Trend should continue to incentivize refiners to prioritize diesel over base oils.

· Chinese light grade base oils premium to diesel holds firm, incentivizes steady/higher output.

· India retail diesel premium to light-grade base oils moves closer to parity.

· Trend likely to dampen demand for light-grade base oils.

· Europe Grp II heavy-grade premium to Group I heavy neutrals widens.

· Europe Group II heavy-grade premium vs light grades widens.

· Trends suggest tighter supply/stronger demand fundamentals for Europe Group II heavy grades.

· Europe Group III premium to Group I SN 150 rebounds to highest since early June, still low.

· Trend suggests Group III vs Group I supply-demand dynamics starting to adjust.

· Europe Group I premium to Asia-Pacific prices extends fall.

· Europe Group I premium to Asia-Pacific prices stays wider than usual.

· Trend of narrowing premium, and speed of change, likely to complicate arbitrage opportunities.

· Europe Group II premium to Asia-Pacific prices narrows more slowly.

· Concern that the premium will continue to narrow likely to hamper arbitrage opportunities, could boost attraction of flexibag shipments vs larger cargoes to limit price exposure.

· Asia Group I/II prices maintain steep premium to domestic Chinese prices.

· Steep premium incentivizes Asia producers to continue to redirect supplies to other markets.

· Steep premium incentivizes Chinese producers/buyers to move China shipments to other markets.