INSIGHT
Base Oil Report Europe
A mix of quiet and activity has been found in Europe’s Group I domestic market recently, as some digest the impact of recent price falls while others prepare for Brexit. The dominant view is of a long market for all grades of Group I in Europe. There is more length on SN150. Healthy supply and discounted offers on the domestic market, the recent fall in export values and muted demand early in the year have driven Q1 2019 prices down.
Amid some easing of Group II pricing with some instances of softness noted in the market, the impact of the new Rotterdam plant is still a matter of speculation. There is a view it could take between three to six months or longer to fully see how material presents competition to both Group I and imported Group II material from the likes of Chevron, Motiva and Flinthills.
US Group I market ranges are steady amid firming demand prospects going into March business. Highly competitive situations are fading as overall base oil demand is gauged as improving, both on seasonal aspects and on attractive base oil pricing.
Group II market ranges are also stabilising on similar fundamentals. The supply glut that extended from the fourth quarter is narrowing, partly because of better domestic demand and partly because of significant volumes of Group II moving in exports during February.
Group III spreads are steady but considered to be under more downward pressure than the other base stock groups. The reason for this is that Group III ranges have remained wide because of the mix of Group III oil types, some fully certified, some partially and some not at all. The mix has had some effect on the overall spreads, pressuring the spreads toward narrowing.
Group II regional chart
Group III supply is healthy despite a Korean turnaround starting this week, while there are traces of higher 8cSt demand. This stronger 8cSt buying interest has resulted in one provider reducing or cutting its allocation to spot sales in favour of term customers. Healthy competition is raging in the non-approved and semi-approved sphere. Slightly higher demand than expected has been seen for March Group III volumes so far.
The Group I Europe export market is showing signs of balancing out following a period of oversupply. Less pressure has been noted on prices in recent weeks as the overhang in the market is gradually absorbed. That said, talk of low demand persists, despite evidence of three tenders open in the market recently. Some refiners have slowed output following the recent supply overhang evident in the market, particularly as prices are now very close to feedstock costs but the market is not thought to have tightened significantly yet.
Group III regional chart
Asia Group II prices for both light grade 150N and heavy grade 500/600N were stable to firm on generally higher deals and discussions, with buying interest for 500/600N said to be relatively better than that of the former product. South Korean refiners were aggressively pushing for price hikes amid strong crude and gas oil values but buyers were resistant to substantial increases. Upward pressure noted on Group II 150N and 500/600N CFR India prices was partly due to the increase in freight cost from northeast Asia to India. That said, suppliers did notice an improvement in buying interest overall as buyers think that prices have bottomed out after having depleted their stock inventories in the past few months.
LINK
www.icis.com
Sarah Trinder, Senior Editor, Manager ICIS
LUBE MAGAZINE NO.150 APRIL 2019
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