Global base oils - week of July 31: Price outlook - margins

·        Global base oils price-premium to crude and diesel prices extends slide.

·        Lack of upward support for outright base oils prices points to sufficient supply to meet demand, adds to incentive for refiners to cut base oils output.

·        If supply is less plentiful than expected, or demand is set to improve in coming months, price incentive for refiners to cut output could leave supply even tighter than expected.

·        Europe’s Group I base oils premium to gasoil falls by more than $300/t in little more than a month to lowest since January.

·        Europe’s Group II base oils premium to gasoil falls less steeply, by more than $150/t since late June, to lowest since 2H March.

·        Asia Group I/II prices fall to steep discount to gasoil prices, from firm premium as recently as mid-May; discount grows to widest since January.

·        China’s domestic Group II light-grade base oils premium to Shandong diesel prices falls by more than $120/t in little more than a month to lowest since Oct 2022.

·        Sliding base oils premium to diesel coincides with China’s rising diesel premium to crude.

·        Sliding base oils premium to diesel coincides with higher costs after imposition of consumption tax on industrial white oils.

·        Chinese refiners show signs of cutting output/extending shutdowns in response to weaker margins.

·        US Group II light-grade posted price premium to heating oil falls to lowest since Oct 2022.

·        US export Group II light-grade price discount to heating oil widens further, adding to incentive for refiners to cut output or redirect supplies back into diesel pool.