Global base oils - week of July 24: Price outlook - inter-grades

·        Europe’s Group II price premium to Group I prices continues to trend wider after staying unusually narrow throughout Q2 2023.

·        Widening Group II premium to Group I could incentivize blenders to use more Group I instead.

·        Widening Group II premium suggests narrower premium to Group I in recent months was temporary – incentivizing blenders to maintain flexibility to switch between Group I and Group II.

·        Europe unapproved Group III 4cst premium to Group II prices falls to narrowest since start of year – incentivizing blenders to use more Group III base oils.

·        Europe unapproved Group III 8cst prices fall to discount to Group II heavy grades for first time in almost a year, from premium of more than $300/t as recently as April.

·        Trend could boost demand for 8cst supplies.

·        Europe approved Group III 4cst premium to unapproved 4cst prices widens further, by more than $300/t since start of year.

·        Asia Group II light-grade premium to Group I base oils holds below $100/t, after narrowing sharply since early June, reflecting steeper correction of Group II prices.

·        Asia Group II heavy-grade premium to Group I base oils stays narrow – providing support to Group II prices and demand.

·        Asia Group III 4cst premium to Group I base oils stays wide, contrasting with narrowing premium in Europe.

·        US Group II heavy grades maintain steep premium to light grades and to Group I base oils.