Global base oils - week of May 2: Price outlook - margins

·        Europe Group I base oil premium to diesel rises to highest in nine months.

·        Europe Group II premium to diesel rises to highest in five months.

·        Rising premium insinuates increasingly firm demand/tight supply fundamentals and incentivizes refiners to raise production.

·        Europe market’s demand-fundamentals show signs of firming vs earlier this year.

·        Buyers’ preference to maintain lower stocks and their ability to cover requirements with ease suggests supply-demand fundamentals are more balanced rather than tight.

·        US posted price premium to heating oil rises to highest this year, despite outright posted-price cut in April.

·        Firm premium to diesel incentivizes US refiners to maintain or raise base oils output.

·        Asia’s Group I/II base oil premium to diesel rises to highest in nine months.

·        Like Europe, firm premium to diesel insinuates strong fundamentals.

·        Firm premium incentivizes higher base oils production, which eases supply-tightness if supply is tight, adds to surplus if supply is balanced.

·        Domestic Chinese Group II light-grade premium to diesel holds firm, close to highest level this year.

·        Strong premium to diesel insinuates firm supply-demand fundamentals, incentivizes domestic refiners to raise output.