·        Base oils producers’ lower Q1 2023 profit from Q4 2022 contrasts with global blenders’ improved profit.

·        Trend reflects impact of lower base oils prices in Q1 and higher lubricants prices that were implemented throughout 2022.

·        Trend highlights natural hedge for companies that produce base oils and lubricants.

·        Global prices likely to face downward pressure from lower crude oil/diesel prices.

·        Prices faced less downward pressure when crude oil prices fell even lower in March 2023.

·        Growing downward price pressure would coincide with weaker demand fundamentals in Asia compared with March, and still-cautious demand in Americas/Europe.

·        Europe Group I base oils premium to diesel rises by more than $450/t since 2H January to highest since August 2022.

·        Europe Group II base oils premium to diesel rises by more than $350/t since late February to highest since September 2022.

·        Europe Group I/II base oils premium to diesel remains down from year-earlier levels. But gap is narrowing.

·        Europe Group I/II premium to diesel surged in Q2 2022 as concern about security of supply triggered surge in demand, tightening supply.

·        Europe Group I/II premium to diesel surges in Q2 2023 despite scant concern about security of supply and more controlled rise in demand.

·        Rising premium to diesel incentivizes domestic refiners to boost base oils output and overseas producers to target Europe with surplus supply.

·       Asia Group I/II premium to diesel extends rise to highest since end-2021.

·        Asia Group II premium to diesel rises to highest since July 2022.

·        Rising base oil premium to diesel coincides with ongoing/additional plant maintenance work.

·        Rising base oil premium to diesel coincides with prospect of more muted regional demand in Q2 compared with Q1.

·        Rising base oil premium to diesel suggests supply may struggle to cover demand, incentivises refiners to boost output.

·        Supply is unlikely to struggle to cover demand.

·        China’s domestic Group II light-grade premium to Shandong diesel stays high.

·        Firm premium partly reflects impact of ongoing plant maintenance in China, incentivizes other refiners to boost output.

·        Demand will need to be sufficient to absorb any additional output and avoid a supply-build.

·        US posted price premium to diesel holds at higher level than before refiners cut posted prices in April.

·        High premium to diesel incentivizes refiners to boost base oils output – despite already-persistent surplus supply.