ANALYSIS
Europe’s Group II base oil supplies rise Catherine Caulfield, Argus Media
Total Group II base oil supply in Europe rose by more than 20pc in the first five months of this year to a record high.
Total supply came to 829,940t in the first five months of the year, according to Argus data. The volume was up 21pc from 688,370t during the same period last year. The volume includes new base oil production in the region, as well as imports from the US and Asia.
Group II availability in Europe has risen following the start-up ExxonMobil’s 900,000t/yr Group II base oil unit at its Rotterdam refinery in the first quarter of the year. The Netherlands’ total base oil production came to 186,000t in the first five months of the year. There was no base oil production during the same period last year.
Base oil supply in Europe has got a further boost from a rise in shipments from the US. These rose to 453,000t in the first five months of the year, up 43,000t from the same period a year earlier. US base oil and lube exports to Europe continued to rise despite the new regional capacity and a narrowing arbitrage. The discount of US export prices to domestic European prices has fallen
from €240/t at the beginning of the year to €120/t for light grade supplies, and from €294/t to €140/t for heavy grades.
Those rising supplies countered a drop in shipments to Europe from Asia-Pacific. These fell to 190,790t in the first five months of this year, down by 31pc from 278,300t during the same period last year. Like the US, the arbitrage from Asia to Europe also narrowed compared with the start of the year. But it remained workable. The discount of Asia-Pacific prices to domestic European prices fell from €270/t at the start of the year to €190/t for light grade base oils. The heavy grade spread has narrowed from €338/t to €220/t.
Rising Group II supplies put pressure on European prices relative to Group I base oils. The premium of European Group II prices over Group I has fallen from €150/t at the start of the year to €100/t for light grades, and from €210/t to €113/t for heavy grades. But that premium remained too wide to encourage some blenders to use more Group II base oils in place of Group I.
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