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IMO 2020:


impact on base oil prices and marine lubricants Catherine Caulfield, Argus Media


IMO’s implementation of a sulphur cap from 3.5pc to 0.5pc in marine fuels by 2020 is sending a shockwave through the refining industry. The change will impact the base oil market both indirectly and directly.


The use of compliant fuels remains the dominant strategy adopted by shipowners as only 2-4pc of a global fleet of 60,000 ships will have scrubbers installed by 2020. Demand for marine gas oil and low-sulphur blends will rise as shipowners switch to low-sulphur fuels. The initial switch will likely disrupt the normal price relationship of feedstocks to base oils.


Indirectly, base oil production faces disruption as more vacuum gasoil (VGO) is diverted to produce low sulphur marine fuels. Low sulphur VGO is also used for low sulphur fuel oil blends, further reducing availability for base oil production.


A sudden drop in base oil production could lead


to higher prices as supply tightens. Refineries’ prioritisation of products with higher margins could also lead to short-term cyclical price movements as the base oil and fuel markets adapt to a new equilibrium. The direct impact will be a reduction in the requirement for marine lubricants to neutralize corrosive sulphur oxides formed during combustion. This will cut the share of additives required in some lubricant formulations, and increase the ratio of base oils.


Major lubricant manufacturers have formulations based on both Group I and Group II base oils. But availability of a high viscosity Group II that rivals bright stock is not yet readily available.


The diversification of fuels used to meet the sulphur cap is leading to demand for a wider range of marine lubricant options. These lubricants must be compatible with the new fuel mix while continuing to protect the engine and drive fuel efficiency.


Argus Base Oils Forum 20 February 2019 | London


The base oils market faces a year of unprecedented change in 2019. The start-up of new Group II base oils capacity in Rotterdam has major repercussions both in Europe and throughout the world. The new capacity adds to an already well-supplied market that faced unusually weak margins in 2018. It also coincides with a structural switch in Europe to higher-quality base oils.


The eighth Argus Base Oils forum will look at the widespread impact of these changes on the European market and their repercussions for the global market.


Location: Conrad St James 22-28 Broadway Westminster London SW1H 0BH


Time: 15:30 – 18:00 Registration: 15:30 Sessions and Q&A: 16:00 Drinks reception: 17:00


Speakers:


Catherine Caulfield Senior Reporter Argus Base Oils


Argus Base Oils Argus Consulting Services


Petroleum illuminating the markets


Register now at: view.argusmedia.com/Argus-Base-Oils-Forum-2019


Guo Harn Hong Analyst


Iain Pocock Editor


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