export destinations like Turkey and Nigeria, but this was very price dependant and generally for small volumes.
The economic issues weighing on several parts of the world are impacting export demand for base oils. Countries like Nigeria and Egypt are facing problems securing foreign exchange and there is no sign when this will end.
Key export market Turkey had very minimal buying interest at the end of 2022 due to high inflation, a weak exchange rate and a cap on finance from several banks.
The economic situation in Turkey is unlikely to change significantly in the first quarter of 2023, and most Turkish sources say there is no economic uptick anticipated in the first half of the year.
If demand remains minimal sellers may look to either cut production or focus more stocks on the domestic market where buying interest is steadier.
In mid-January, export prices were at a significant discount to domestic values, and were very close to feedstock vacuum gas oil (VGO) levels. This could further force producers to look at either pushing volumes to the domestic market or instead focus on fuel production.
According to ICIS analyst Michael Connolly, supply pressures caused by the Russia-Ukraine war have to an extent stabilised with the redirection of trade flows. Demand concerns, driven by the macroeconomic environment continue to weigh heavily on market sentiment, however the 5 February products embargo on Russia to Europe could spark a dramatic rise in gas oil cracks. When gas oil cracks rose in the second and third quarter of 2022 this raised base oil prices significantly. However, the more orderly move in February is likely to result in a more muted effect in the base oils market than seen in 2022.
Outlook for Group I base oils
www.icis.com
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editor@ukla.org.uk or call: + 44 1442 875922 LUBE MAGAZINE NO.173 FEBRUARY 2023 25
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