Several refineries are offering cargoes of all three grades for the export market but are facing challenges moving volumes to usual outlets like West Africa and Turkey. Issues with payments and access to lines of credit throughout 2023, as well as high prices, has restricted demand for European product from west African buyers.
Meanwhile, Turkish blenders looked to more competitively priced Russian supplies. Argus assessed SN 150 fob Black Sea prices held a $230/t discount to European export levels in January 2024. The EU embargo on Russian products has kept the discount consistent since March 2023, before it was at just $70/t. Russian base oils are consistently and reliably cheaper, as such Turkish demand is unlikely to pivot back towards European volumes.
Spot Group I prices are on course for further downward pressure in 2024, underpinned by a relatively light refinery maintenance programme in Europe, sustained base oil premiums over fuels, and limited demand and export outlets for refineries to shed excess product.
Supply surplus of premium grades Europe’s Group II spot prices were steady to declining in early 2024 on weak demand and regional supply availability. But Europe has maintained a global premium to Asian and US exports at $360-560/t for light and heavy grades in January. Maintaining an open arbitrage window to Europe with abundant supplies looking to target buyers.
Meanwhile, European Group III spot prices began a ten-month uninterrupted fall from April 2023, running into early 2024. Yet they maintain a global premium of $375-390/t over Asian and Mideast Gulf volumes at $1,565/t for 4cst on an fca northwest Europe basis in January. Surplus volumes from these regions have consistently targeted European buyers, further pressuring prices downwards with abundant supply. Suppliers and distributors also discounted offer volumes to free up tank space expecting replenishment volumes in the new year with lower than expected buying appetite, hence maintaining the surplus since the fourth quarter of 2023 into the new year.
But the conflict in the Red Sea, and attacks on shipping vessels by Yemen’s Houthi rebels disrupted
LUBE MAGAZINE NO.179 FEBRUARY 2024 39
movements through the Suez Canal. Vessel insurance premiums surged, increasing freight costs and limited vessel availability. Some shipments were diverted around South Africa, adding an estimated 20 days to voyages.
The increase in freight costs and voyage times led to the exit of Asian offers of Group II material in early January. But this has impacted Group III spot supplies more than Group II as Europe can rely on domestic supply. Europe has Group II refinery in Rotterdam producing an estimated 1mn t/yr of supplies. While buyers are mostly reliant on Group III imports from the Mideast and Asia, as the nameplate capacity remains at 13pc of total European nameplate production. Once the surplus overhang of cheaper imported spot volumes has been eaten into, replenishment Group III cargos look set to impacted by rising costs.
Another factor that could exacerbate Group III spot supplies in early 2024 is a heavy scheduled refinery maintenance programme in Asia. Malaysia’s state-owned Petronas’ began a maintenance from 24th January to 3rd March at its Group III plant in Melaka. SK Enmove is carrying out work for a month at its Ulsan plant in South Korea from mid-March. This will curb spot Group III availability and will impact European buyers as blenders limited term volume allocations for 2024 contracts and rely more on the spot market. Further, any rebound in US demand as blenders look to replenish stocks in the new year could support spot prices and incentivise sellers to pivot arbitrage flows away from Europe.
The European base oil industry is facing new challenges in 2024. Muted demand and minimal maintenance look to keep Group I supplies readily available and prices weak. While geopolitical factors disrupting shipping lines and maintenances in Asia is likely to maintain tight Group III supplies and add upward price pressure.
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 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60
