Global base oils - week of Aug 28: Price outlook - arbitrage

·        Cfr India Group II import cargo prices strengthen vs cfr northeast Asia/fob Asia prices, ICIS data shows.

·        Firmer cfr India prices vs fob Asia prices contrast with weakening India price premium to Asia prices over past month.

·        Cfr India Group II light-grade price premium to US export prices steadies at lowest level since Feb 2023.

·        Cfr India light-grade price-premium to US export prices had been weakening since early June.

·        Steadier-to-firmer cfr India price premium to Asia/US prices points to firmer fundamentals that could make arbitrage to India more feasible.

·        Steady-to-firm India price premium contrasts with weak cfr northeast Asia premium to fob Asia prices.

·        Cfr northeast Asia Group II prices barely revert to premium to fob Asia Group II prices.

·        Fob Asia Group II light-grade price discount to domestic Chinese prices narrows further, after widening for more than a month through to mid-July.

·        Price weakness suggests China has sufficient domestic supplies to cover expected seasonal pick-up in demand in coming weeks.

·        Price weakness could suggest concern that China’s seasonal pick-up in demand could be weaker than expected, prompting buyers to continue to hold off replenishing stocks.

·        Fob Asia Group II light-grade prices maintain small premium to US export prices.

·        Weak Chinese demand, small cfr India premium to Asia prices, closed arbitrage for light grades from Asia to US, and firm diesel values incentivize Asia refiners to minimize light-grade base oils production.