Global base oils - week of Aug 21: Price outlook - arbitrage

·        Europe’s Group II prices maintain steep premium to US/Asia prices, maintaining attraction of moving arbitrage shipments to Europe.

·        Europe’s steep Group II premium for extended period suggests supply remains structurally tight, sustaining need for arbitrage shipments.

·        Europe’s Group I base oils premium to Asia prices widens further.

·        Trend keeps shut arbitrage from Europe to markets like Mideast Gulf/India.

·        Trend sustains attraction of moving Asia Group I shipments to Mideast Gulf/India and to Europe.

·        Europe unapproved Group III base oils discount to Asia prices stays at widest in years – curbing attraction of moving more such supplies to Europe.

·        Europe approved Group III base oils premium to Asia prices stays wide.

·        Gap between US and Europe Group III prices stays narrow for third month.

·        Asia Group II discount to domestic Chinese prices holds in narrow range that keeps arbitrage marginal.

·        Asia Group II price differential to domestic Chinese prices steadies in recent weeks after falling sharply in June and July.

·        Asia Group I bright stock discount to domestic Chinese prices holds in narrow range over past month that keeps arbitrage marginal.

·        Asia bright stock differential to domestic Chinese prices had been much narrower in May and June, keeping arbitrage shut.

·        Any pick-up in arbitrage shipments from Asia to China would follow slowdown in such flows in recent months, help remove more supplies from regional market.