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

·        Global base oils prices extend slide versus gasoil, boosting incentive for refiners to focus on maximising diesel production.

·        Global base oils prices fall less sharply versus feedstock prices, supporting relatively firm margins.

·        Trend reflects strength of diesel prices relative to crude, highlighting the benefit of comparing competing and feedstock prices to maximise refining margins.

·        Squeezed base oil prices versus diesel raises prospect of lower refinery run-rates / fall in base oils supply.

·        Fob Asia light-grade base oils prices maintain steep discount to gasoil, especially for Group I prices, ICIS data shows.

·        Only fob Asia Group I bright stock prices maintain premium to gasoil, with premium close to lowest in a year.

·        Domestic China Group II light-grade price premium to Shandong diesel prices stays close to weakest level since end-2022.

·        Weak domestic base oil premium to diesel contrasts with firm diesel premium to crude, incentivizing refiners to extend base oil run-cuts/shutdowns.

·        Europe Group I light-grade export prices fall to widening discount to gasoil prices.

·        Europe base oil prices fall less sharply versus VGO, reflecting strength of diesel prices.

·        US base oils prices similarly fall more steeply versus diesel than versus VGO.

·        US Group II light-grade export prices hold at steep discount to heating oil.

·        US domestic Group II light-grade price premium to VGO still falls to lowest since Q1 2022.