Global base oils – week of June 26: Price outlook - margins

·        Base oils values remain firm vs diesel, especially in Europe, even after correcting lower over past month.

·        Firm base oils values contrast with much weaker diesel premium to crude v Q2 2022-Q1 2023 levels.

·        Europe’s Group I/II base oils values edge up vs diesel after slipping since 1H May.

·        Europe’s base oils values vs diesel hold firm vs 2H 2022/Q1 2023 at levels that incentivize refiners to maintain or increase base oils output.

·        Europe’s Group I base oils values vs diesel remain up more than $370/t since mid-January; Group II values remain up less than $200/t since mid-January, reflecting outperformance of Group I during that time.

·        Asia’s Group I/II base oils values vs diesel edge up after dipping from 1H May.

·        Asia’s Group I//II base oils values vs diesel rise less sharply than in Europe since 1H January, fall more sharply since 1H May.

·        Asia’s Group II base oils values vs diesel continue to outpace Group I values since mid-January, contrasting with Europe’s Group I price strength vs diesel.

·        China’s domestic Group II light-grade base oils premium to Shandong diesel prices extends rise since early June even as domestic output rises.

·        Domestic base oils premium to diesel moves closer to high end of range over last two years.

·        China’s firmer domestic base oils premium to diesel in recent weeks, amid rising supply, insinuates firmer demand to absorb the supply.

·        US Group II light-grade base oils price premium to diesel holds close to lower end of range since Feb 2023, above Oct 2022-Jan 2023 levels.

·        US Group II light-grade base oils premium to diesel holds well below Q3 2022 levels, when high prices attracted arbitrage supplies and incentivized refiners to boost base oils output.