BASE OILS
New Year, new challenges for European base oil spot prices
Gabriella Twining, Global Editor Base Oils, Argus Media
European base oil prices started 2024 on a downward trend, pressured by surplus spot supply amid refinery start-up, minimal maintenance and muted demand across all Groups. But a worsening crisis in the Suez Canal, lent upward price pressure on Group III especially, given Europe’s dependence on imports from both the Mideast and Asia.
Refineries are running well, ENI resumed production in September from April 2023 and ramped up steadily, offering supplies to the market. There was also a very light maintenance schedule over 2023 up to the first half of 2024, compared with 2022, and so supplies are available.
Further favourable base oil premiums compared to competing fuels also incentivised greater base oil production, adding to supply. The Argus SN 150 premium to vacuum gasoil held at $425/t in the first half of January 2024, trending downwards from highs of $525/t in November. By contrast diesel is holding at $215/t during the same time period, falling also from $285/t in November. Though both prices are falling, base oil premiums remain at over $200/t. This suggests that refiners will continue to prioritise base oil production adding to the supply surplus of Group I in the first quarter of 2024.
Lacklustre is the word “du jour” to describe buying interest for Group I domestic base oils.
38 LUBE MAGAZINE NO.179 FEBRUARY 2024
Weak demand has been a key factor weighing on spot prices which have been falling gradually and continuously since October 2023. The Argus European SN 150 fob domestic spot price fell to $960/t in mid-January 2024, down by 12pc from October levels.
Low activity over holidays, high stocks and lower price ideas contributed to weak demand. Blending operations slowed over the Christmas holiday season extending into early January. Blenders also face challenges clearing high inventory levels at the start of the year for lubricants formulated with higher priced base oils which are increasingly uncompetitive as European base oil prices trend lower. Finished lubricant buyers are also looking at more competitively priced alternatives from Asia and the Mideast Gulf. Amid supply surplus, continued weak demand and expectations of falling prices, some blenders have decided to term up less 2024 volumes, preferring to rely on the spot market further adding more supplies to the spot market.
Weak domestic demand, export cargo availability and limited viable export outlets are also driving European export spot prices lower in the new year. Refineries look to rid themselves of surplus to maintain high domestic prices. As such, the discount of export SN 150 to domestic has widened to $160/t in January from $110/t in December.
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