Base Oil Report
Supply of SN150 and SN500 remained tight in Europe until the end of 2016 amid recent production issues at some refineries. One refinery was ramping up production to build inventories but said it would not be offering product openly on the market before the end of 2016.
Conditions in the solvent neutral grade markets are expected to remain tight going into January 2017.
Looking forwards to February 2017, there is potentially some maintenance on the cards.
Spanish energy major Cepsa will shut down its base oil production in Algeciras early next year, probably in February, for a short maintenance turnaround in order to fix a fault with its vacuum unit, a company source said in October.
The fault is currently reducing base oil output by around 20%, the source said, and the shutdown will be for around 10 days. The unit’s nameplate capacity is 200,000 tonnes/year of Group I base oils.
Brightstock is still defying expectations of tightness and is said to be widely available. Some market players expect this to bring further downwards pressure on prices but others believe any supply length will be absorbed during 2017.
The Baltic and Black Sea export markets were also experiencing limited availability of SN150 and SN500 amid the absence of a major supplier to the regions. However, there was some indication towards the end of December that supply conditions may be starting to improve.
The general outlook for 2017 is blurry at present, although ongoing supply conditions and crude oil price movements are likely to be the key drivers behind base oil prices.
Prices for Group II and Group III base oils in Europe have been steady in recent weeks amid fairly stable conditions.
Group III availability in Europe is healthy amid supply from Abu Dhabi and Russia. While this material is of good quality,
particularly the former, neither has OEM (original equipment manufacturer) approvals.
As such, the new material has directly only competed other unapproved Group III material, with the result being that the range of prices has widened, with approved holding steady at the top and unapproved being pulled down.
Some players see this situation evolving into a two tier market for Group III base oils with approved and unapproved material eventually having distinct pricing.
Sarah Trinder Senior Editor, Manager ICIS
LINK
www.icis.com
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