Global base oils - week of Sep 4: Price outlook - arbitrage

·        Europe/US Group III base oil price premium to Asia Group III prices edges higher after sustained slide, ICIS data shows.

·        Trend raises prospect of more premium-grade supplies moving to Europe and US.

·        Current price spreads remain at levels that make less attractive for now a repeat of the surge in Group III shipments to Europe in Q2 2023.

·        More Group III supplies could instead start to move to US market.

·        Europe Group III 4cst base oils premium to Asia prices extends gradual recovery after falling to nine-month low of less than $350/t in mid-July.

·        Europe Group III premium to Asia prices falls through Q2 2023 after rising to multi-year high of more than $650/t in early April.

·        Europe’s widening Group III premium to Asia prices in early 2023 incentivized more supplies from Mideast Gulf and Asia to move to Europe in Q2 2023.

·        Recovery in Europe Group III premium to Asia prices in recent weeks remains relatively small so far – premium edges back above $400/t.

·        Europe’s price premium to Asia prices remains much lower than earlier this year but well above historical levels.

·        Trend could start to revive interest in moving more Asia-Pacific supplies to Europe.

·        US Group III 4cst premium to Asia prices recovers in recent weeks after falling in 1H July to more-than-two-year low of around $300/t.

·        US Group III premium to Asia prices fell from around $600/t at end-2022, cutting attraction of moving Group III shipments to US.

·        US Group III premium to Asia prices remains below $400/t even after recent recovery.

·        US Group III discount to Europe prices narrows to less than $20/t, extending a trend that began in early Q2 2023.  

·        US Group III discount to Europe prices widened to more than $200/t at start of Q2 2023.

·        US Group III discount to Europe prices was the widest in more than five years.

·        Wide US Group III discount to Europe prices boosted attraction of moving more Group III supplies to Europe rather than to US in Q1-Q2 2023.

·        Trend contrasted with larger flow of Group III supplies to US than Europe in 2022 from markets like Mideast Gulf.

·        Narrower US Group III discount to Europe prices in recent weeks reduces attraction of prioritising Europe market, raising prospect of more shipments moving to US over coming months.

·        Trend raises prospect of Group III supplies targeting US and European markets over coming months, rather than just Europe.