Global base oils – week of June 19: Price outlook – inter-grades

·        Europe Group II base oils prices stay unusually competitive vs Group I prices, like in Asia.

·        Trend of more competitive Group II prices extends to three months.

·        Stronger rise in Europe’s Group I prices vs Group II prices since start of year points to structurally tighter-availability of Group I, more plentiful availability of Group II.

·        Structural change in Group I supply fundamentals and more competitive Group II prices add to incentive for blenders to use more premium grades instead of Group I.

·        Europe unapproved Group III premium to Group I narrows further; approved Group III premium stays wide.  

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

·        Trend reflects improving availability of unapproved Group III base oils, compensates for loss of premium-grade supplies of Russian origin.

·        Trend incentivizes blenders to maximise consumption of unapproved Group III base oils.

·        Asia Group II light-grade premium to Group I stays wider than usual; heavy-grade premium stays narrow.

·        Trend reflects more the weakness of Group I light grades rather than strength of Group II.

·        China’s domestic Group I light grades maintain steep premium to Group II base oils.