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

·        Europe’s Group II prices stay unusually competitive vs Group I prices.

·        Outperformance of Europe Group I prices vs Group I and Group III prices in recent months reflects change in supply-demand dynamics that show signs of being longer-term structural changes.

·        Prospect of increasingly tighter Group I base oils supply likely to provide further price support vs premium-grade prices.

·        Trend mirrors similar pattern in Asia several years ago – that prompted more widespread adoption of Group II base oils.

·        Wider unapproved Europe Group III price discount to approved Group III prices boosts attraction for blenders to minimize usage of supplies with approvals.

·        Asia’s Group I SN 150 price maintains steep discount to SN 500 and to Group II N150.

·        Steep discount contrasts with narrow Group I SN 500 discount to Group II heavy grades.

·        China’s domestic Group I prices stay firm relative to Group II prices – reflecting plentiful supply of Group II and incentivizing blenders to minimize Group I consumption.

·        China’s domestic Group II light-grade price discount to prices for imported supplies widens, boosting attraction of procuring more domestic supplies.