· Europe/Asia Group II base oils values vs diesel slip to lowest in more than two months.· Widening Asia Group I/II discount to diesel incentivizes refiners to cut run rates..· China’s domestic Group II light-grade price premium to diesel extends slide, curbing attraction of boosting base oils output..· US refiners cut Group I/Group II/Group III/ naphthenic posted prices, after fall in spot prices in recent weeks.· US refiners cut light-grade posted prices more steeply than heavy-grade prices.· US light-grade posted price premium to heating oil falls more than $300/t since early December.· US light-grade/heavy-grade posted price premium to heating oil still much higher than Q1 2022 levels.· US heavy-grade posted price premium stays at steep premium to Asia-Pacific prices, maintaining feasibility of arbitrage shipments. · Europe’s falling base oils premium to diesel incentivizes refiners to switch to producing other products, just weeks ahead of seasonal rise in demand.· Base oils spot prices reflect state of current market, rather than market in one-to-two months’ time.· Refineries’ supply adjustments take time to implement, raising risk of mismatch between current prices and future supply-demand fundamentals.· Such supply adjustments suggest price signals that reflect state of current market are inappropriate for decisions that affect supply in one-to-two months’ time.· Rising risk of insufficient supply in one to two months’ time raises likelihood of increase in price volatility during that time.· Predictability of price volatility means volatility could be better managed or avoided.· Europe Group II premium to Group I stays narrower than in Q2-Q3 2022, but still wide.· Asia Group II premium to Group I stays unusually narrow, incentivizing blenders to use more Group II.· Asia Group I bright stock premium to SN 500 rises to highest in more than a year as supply-demand fundamentals diverge.· Asia Group I discount to Europe prices narrows further, making arbitrage less feasible, increasing competition for Mideast Gulf/India markets.· Asia Group II discount stays wide to Europe, even wider to US – sustaining attraction of trans-Pacific shipments.· Firm US Group II heavy-grade prices complicate arbitrage to Europe.· Chinese domestic bright stock price premium to Asia cargo prices narrows, complicating arbitrage.· Domestic Chinese Group II light-grade prices maintain small discount to fob Asia cargo prices, complicating arbitrage.· Domestic Chinese Group II heavy-grade prices maintain premium to fob Asia cargo prices, boosting attraction of that arbitrage.· Wide discount of domestic Chinese Group II light-grade prices vs domestic prices for imported supplies cuts attraction of light-grade imports.· Less workable arbitrage leaves Chinese buyers more reliant on domestic supplies to cover any pick-up in demand in coming weeks.· Chinese buyers would face any pick-up in demand with low stocks, raising prospect of rapid price adjustments to attract additional supplies..Global base oils - week of Jan 16: Supply outlook
· Europe/Asia Group II base oils values vs diesel slip to lowest in more than two months.· Widening Asia Group I/II discount to diesel incentivizes refiners to cut run rates..· China’s domestic Group II light-grade price premium to diesel extends slide, curbing attraction of boosting base oils output..· US refiners cut Group I/Group II/Group III/ naphthenic posted prices, after fall in spot prices in recent weeks.· US refiners cut light-grade posted prices more steeply than heavy-grade prices.· US light-grade posted price premium to heating oil falls more than $300/t since early December.· US light-grade/heavy-grade posted price premium to heating oil still much higher than Q1 2022 levels.· US heavy-grade posted price premium stays at steep premium to Asia-Pacific prices, maintaining feasibility of arbitrage shipments. · Europe’s falling base oils premium to diesel incentivizes refiners to switch to producing other products, just weeks ahead of seasonal rise in demand.· Base oils spot prices reflect state of current market, rather than market in one-to-two months’ time.· Refineries’ supply adjustments take time to implement, raising risk of mismatch between current prices and future supply-demand fundamentals.· Such supply adjustments suggest price signals that reflect state of current market are inappropriate for decisions that affect supply in one-to-two months’ time.· Rising risk of insufficient supply in one to two months’ time raises likelihood of increase in price volatility during that time.· Predictability of price volatility means volatility could be better managed or avoided.· Europe Group II premium to Group I stays narrower than in Q2-Q3 2022, but still wide.· Asia Group II premium to Group I stays unusually narrow, incentivizing blenders to use more Group II.· Asia Group I bright stock premium to SN 500 rises to highest in more than a year as supply-demand fundamentals diverge.· Asia Group I discount to Europe prices narrows further, making arbitrage less feasible, increasing competition for Mideast Gulf/India markets.· Asia Group II discount stays wide to Europe, even wider to US – sustaining attraction of trans-Pacific shipments.· Firm US Group II heavy-grade prices complicate arbitrage to Europe.· Chinese domestic bright stock price premium to Asia cargo prices narrows, complicating arbitrage.· Domestic Chinese Group II light-grade prices maintain small discount to fob Asia cargo prices, complicating arbitrage.· Domestic Chinese Group II heavy-grade prices maintain premium to fob Asia cargo prices, boosting attraction of that arbitrage.· Wide discount of domestic Chinese Group II light-grade prices vs domestic prices for imported supplies cuts attraction of light-grade imports.· Less workable arbitrage leaves Chinese buyers more reliant on domestic supplies to cover any pick-up in demand in coming weeks.· Chinese buyers would face any pick-up in demand with low stocks, raising prospect of rapid price adjustments to attract additional supplies..Global base oils - week of Jan 16: Supply outlook
