Global base oils - week of July 24: Price outlook - margins

·        Global base oils values face growing pressure versus rising diesel and crude prices as outright prices hold steady or fall.

·        Europe’s Group I base oil values vs diesel fall more than $250/t in little more than a month to lowest since end-Feb 2023.

·        Europe’s Group II base oils values vs diesel fall less sharply on steadier outright prices and weaker US dollar vs euro.

·        Trend suggests Group I base oils face pressure from oversupply, incentivizes refiners to cut production.

·        Asia Group I prices fall to discount to diesel for first time since 2H Jan 2023; Group II prices barely maintain premium to diesel.

·        Asia Group I/II premium to diesel falls more than $250/t in past two months.

·        Trend suggests market faces oversupply that prevents refiners from raising prices.

·        Trend incentivizes refiners to cut production.

·        China’s domestic Group II light-grade price-premium to Shandong diesel prices falls to nine-month low.

·        Base oil premium to diesel falls despite recent imposition of consumption tax on industrial white oils.

·        Sliding base oil premium to diesel suggests market faces weak demand and surplus supply.

·        Trend likely to deter start-up of new refining capacity, incentivize other refiners to undergo or extend plant maintenance.

·        US Group II light-grade posted price premium to heating oil falls to lowest since mid-January.

·        US Group II light-grade export prices slide to deeper discount to heating oil, incentivizing refiners to cut output.