Europe readies for switch to Group II
European Group II base oil supply and demand dynamics face major structural changes in the coming months, driven by increasing availability and new finished-lubricant regulations.
The ACEA 2016 sequences will be mandatory for all ACEA-registered lubricants from 1 December 2018. Higher performance engine oils are required to withstand higher temperatures in combustion engines, increased use of biofuels and the push for fuel efficiency and economy. Meeting these requirements will drive demand for Group II and Group III base oils in the automobile sector, and cut demand for Group I. Surplus Group I will be increasingly used in engine oils blended in Europe and sold overseas and in marine and industrial lubricants.
ExxonMobil’s new 1,000,000t/yr Group II base oil capacity at Rotterdam in 2019, combined with increasing base oil imports from the US and Asia-Pacific, should provide sufficient security of
supply for blenders. US exports of 489,000t to Europe in the first half of this year rose 2pc from the same period last year to a record-high. Exports of more than 280,000t from Singapore to Europe in the first six months of the year were up 42pc from year-earlier levels.
Group II prices have maintained a significant premium to Group I in 2018. The Group II N150 premium to Group I SN 150 averaged around $107/t this year, up from a premium of less than $30/t during the same period last year. Reflective spot prices are crucial in order to mitigate risk during the transition from Group I to Group II.
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Four Group II price assessments: N100, N150, N220 & N600 with 5 years price history
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