Global base oils - week of May 8: Price outlook - arbitrage

·        Widening Europe Group II price premium to US prices increases feasibility/attraction of moving more shipments to Europe.

·        US Group III price premium to European prices stays narrower than in Q4 2022/early 2023 – boosting attraction of moving more shipments to Europe.

·        Europe Group II prices maintain wide premium to Asia-Pacific prices – making feasible again arbitrage flows from Asia to Europe.

·        Europe Group I price premium to Asia prices continues to widen – boosting attraction of moving Asia cargoes to India/Mideast Gulf and curbing outlets for any Europe arbitrage cargoes.

·        Asia Group I bright stock/Group II heavy-grade price discount to US prices stays wide – sustaining attraction of tapping that arbitrage.

·        Asia Group I bright stock discount to domestic Chinese prices widens slightly - much wider than Feb-March levels, narrower than Q4 2022/Jan 2023 levels.

·      Arbitrage likely to remain hard to work.

·        Asia Group II light-grade/heavy-grade discount to domestic Chinese prices narrows – making arbitrage flows to China increasingly hard to work.

·        Less feasible arbitrage coincides with ongoing plant maintenance work in China, suggesting domestic supply remains sufficient even with capacity offline.

·        Less feasible arbitrage to China likely to prompt refiners to redirect supplies to other markets instead.

·        US Group II light-grade arbitrage to India likely to need to stay open if surplus US supply lingers or grows.

·        US arbitrage flows to India and less attractive Asia arbitrage to China could increase competition for India market or prompt more Asia light-grade supplies to target markets like North/West Africa.