INSIGHT Europe’s base oil prices to remain supported
by supply constraints European base oil prices are likely to receive some support in the first half of 2022 from firmer seasonal demand and tighter supply from lower refinery run rates and plant maintenance. Refinery run rates will continue to be determined by transport fuel margins, which have been impacted by weaker demand linked to Covid-19 restrictions. Lower throughput cut vacuum gasoil (VGO) and hydrocracker bottoms availability for base oil production, leading to soaring 12-month prices from June 2020.
Clara Toellner and Catherine Caulfield, Argus Base Oils
March for works. In Eastern Europe, Mol’s Szazhalombatta Group I unit will go down for maintenance in May.
The closure of Galp’s 180,000t/yr Group I base oil unit in 2021 will affect Group I availability this year, when the firm will begin procurement to cover its lubricant blending demand. Galp had been covering internal demand from stocks to the end of 2021.
EU refinery run-rates hit lows of 67% in May 2020 during the first Covid-19 lockdown, according to Euroilstock data and Argus calculations. Run rates rose to an average of 77% between July and November 2021 which coincided with improving Group I spot supply and falling prices. While throughput recovered in the second half of last year, it remained 5% lower than during the same period in 2019. Plant maintenance in the first half of 2022 and recent permanent closures is adding to supply uncertainty this year.
Maintenance at Eni’s Livorno Group I unit has extended in to 2022. Cepsa’s San Roque Group I unit will halt in
EU blenders continue to rely on Group II and Group III base oil imports from North America and Asia-Pacific, along with domestic production to cover demand Europe’s Group II prices will get support from a heavy round of US Group II plant maintenance that is scheduled to kick off in the second half of this year. Group III prices are likely to remain unusually firm in 2022 as they continue to be supported by more limited supply and feedstock constraints. Competition between regions seeking Group II and Group III cargoes to meet domestic demand would add further price support for these premium grades.
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