Continued from page 54
Growing Group II base oil interchangeability would provide further options for European buyers. An oil major in the Mideast Gulf announced in February plans to streamline the marketing of base oils produced by its affiliates. The move is expected to improve the interchangeability and linkage of their automotive Group II slates. Such a move will reduce the complexity of lubricant formulations and provide buyers with access to the same base oil slate from different plants. Once fully integrated, European buyers would have regular access to the same Group II base oils from several different supply nodes located in different parts of the world. Luberef’s new 715,000 t/yr Group II plant is expected to start production in the third quarter of the year.
A new Group II plant in Rotterdam is also expected to start operations in 2019. The unit would be the first such Group II unit in Europe. The plant would improve substantially the availability and security of Group II base oils supply in the region. All such supplies have been imported so far. The domestic production would cut logistical costs, add more supply options, and provide the opportunity to lower the cost for blenders to use Group II base oils in their formulations.
Such moves would likely quicken the transition to a Group II base oil market in Europe. A clear sign of increasing uptake of Group II base oils in Europe would be an accompanying increase in the number of closures of Group I plants in the region.
European Group III prices are expected to edge higher, but remain in a narrow range in 2017. Group III prices are expected to follow an inverted U-shaped price trend in 2017.
A wave of Group III plant maintenance or production-issues will reduce supply availability of premium-grade base oils in the region. The lower supply should provide price support for Group III prices in the immediate term.
SK-Repsol’s 650,000 t/yr Group III plant in Cartagena will be under partial maintenance for three weeks in May. Tatneft’s 186,000 t/yr base oil plant in Russia will be offline for a month from mid-April.
Production of base oils from the 140,000 b/d Pearl gas-to-liquids (GTL) refinery at Ras Laffan in Qatar is also expected to be uncertain in the immediate term. The plant has been closed for a shutdown
56
lasting at least two months. Production from the plant has also been irregular since December last year.
A drop in production from the plant has coincided with an increase in demand for Group III base oils in the global market. The increase in demand has tightened supply availability of Group III base oils in a previously oversupplied market. This is expected to provide further upward pressure on prices in the near term.
While Europe has domestic Group III production in Finland and Spain, domestic Group III prices in Europe need to be higher in order to attract supplies from producers from other regions. In order to incentivize Asian refiners to export Group III base oils to Europe, the premium of European Group III prices over Asian Group III prices needs to be high enough to cover the logistical costs and trading margins. If not, Asian Group III producers would rather prioritize selling to markets in Asia where they can lock in higher margins. To sustain regular Group III supply from producers in Asia, the premium of European Group III prices over Group III prices in Asia would have to rise. We subsequently project European Group III prices to be firmer in 2017.
The weak Euro could affect blenders’ willingness to secure imported Group III supplies at higher prices. But that would then provide regional producers with more leverage to raise their own prices.
The Argus Base Oils Outlook is a monthly forecast of key base oil prices spanning 12 months into the future. The report is published on a monthly basis – allowing Argus to incorporate the latest market development and intelligence in the price forecasts.
For more information – contact us at
www.argusmedia.com/oil-products/ argus-base-oils-outlook
Alvin Chew
Senior Analyst, Head of Base Oils Outlook, Argus
LINK
www.argusmedia.com
LUBE MAGAZINE NO.138 APRIL 2017
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76
