INSIGHT
Tight supply to support Europe’s base oil prices in the first half of 2021
Catherine Caulfield and Clara Toellner, Argus Media
European base oil prices are likely to find support in the early part of 2021 from limited spot supply and a seasonal boost in demand.
Consumption could get additional support from a rebound in economic activity as Covid-19 vaccines are rolled out in key markets — although any economic recovery could also trigger a rise in supply, with higher fuel demand prompting an increase in global refinery utilisation rates, boosting feedstock supply and enabling more base oil production.
In the meantime, Group I supply in Europe will be tight in early 2021, with planned maintenance and closures set to cut up to 324,000t of production in the first half of the year. That is equivalent to a large regional unit’s annual production. The impact of turnarounds on spot availability will be compounded by low inventory levels at refineries, which have been producing at reduced rates since March 2020. Refineries are cutting back on spot sales earlier than usual in order to build stocks ahead of shutdowns. They are also taking longer to replenish inventories. Group II prices in Europe are likely to find support from stricter technical requirements for premium- grade base oils in the automobile, marine and industrial sectors, which are bolstering demand for Group II grades. And tight and less reliable Group I supply is adding to Group II demand. Meanwhile, the Group II supply outlook remains uncertain. Unlike other markets, regional production is reliant on a single plant. Output of 478,000t in January- September 2020 was 11pc higher than the same period a year earlier, but it reflected only 71pc of nameplate capacity.
40 LUBE MAGAZINE NO.161 FEBRUARY 2021
Supply from overseas markets was more volatile in 2020. Group II output in the US and Asia-Pacific fell. And demand in those regions, as well as in Latin America and India, rose strongly during the second half of the year, curbing the amount of supply available for Europe.
The Group III base oil market faces similar supply and demand fundamentals, and this could extend well into 2021. Maintenance in Europe will impact supply of base oils with original equipment manufacturer (OEM) approvals. Finnish firm Neste’s 250,000 t/yr unit at Porvoo will shut in April for eight weeks of maintenance. The SK-Repsol joint venture’s 450,000 t/yr Cartagena unit in Spain is due to undergo maintenance work that was delayed from 2020. The joint venture had planned to increase the plant’s capacity by 50pc in 2021, but it is unclear if this remains on schedule.
Demand for semi-approved or non-approved Group III base oils is also likely to remain strong. These could help to cover the shortfall in availability of approved base oils where blenders’ legacy formulations allow. Stricter engine oil requirements are boosting demand for Group III base oils in North America, India and China. This leaves European importers facing stiffer competition for limited spot cargoes from producers in Asia-Pacific, the Mideast Gulf and Russia.
LINK
www.argusmedia.com
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
