Global base oils – week of July 3: Price outlook - margins

·        Base oils values vs diesel remain high even as they face more downward pressure.

·        Europe’s Group I base oils premium to diesel falls to lowest in more than two months, still up more than $380/t since 2H Jan 2023.

·        Europe’s Group II base oils premium to diesel holds steady, down more than $100/t since early May, still up more than $250/t since late Feb 2023.

·        Europe’s approved Group III base oils premium to diesel stays unusually high even as it edges down to lowest since early 2023.

·        High base oils values point to firm supply-demand fundamentals, incentivize refiners to maintain or raise production.

·        Asia’s Group I/II base oils premium to diesel resumes fall; Group II values remain more than $300/t above 2H Jan 2023 levels.

·        China’s domestic Group II light-grade base oils premium to Shandong diesel prices falls to five-month low, stays higher than usual.

·        Falling base oils premium to diesel and falling diesel premium to crude could incentivize Chinese refiners to trim run-rates and delay plant restarts or start-up of new capacity.

·        US light-grade Group II posted price premium to heating oil stays low vs recent months, still relatively firm.