Global base oils - week of July 17: Price outlook - margins

·        Global base oils values extend slide vs diesel as steady-to-weak outright prices contrast with rising feedstock costs.

·        Base oils values vs diesel remain well above lows at start of year.

·        But falling base oils values vs diesel incentivize refiners to adjust production in a way that gives them leverage to maintain or raise outright prices.

·        Europe’s Group I base oils price premium to diesel falls more than $200/t since early June to four-month low.

·        Europe’s Group II base oils premium to diesel falls by more than $100/t since early June to three-month low.

·        Asia’s Group I base oils values vs diesel fall to lowest since early February; Group II values fall to lowest since early March.

·        Base oils values fall to levels that incentivize refiners to cut production.

·        Domestic Chinese N150 base oils price premium to Shandong diesel prices extends fall to lowest since 2H Jan 2023; holds well above 2H 2022 levels.

·        US base oils export values face similar downward pressure vs diesel, compounded by their competitive levels vs prices in overseas markets.

·        Trend incentivizes refiners to cut output of surplus supplies as arbitrage stays workable but uneconomic.