Base Oil Report
Group I base oil prices in the domestic European market have been largely stable through March and April.
Pressure on the solvent neutrals, which was present during February because of abundant Baltic imports, eased off as a programme of maintenance turnarounds in Russia tightened Baltic availability.
As sellers of Baltic material in Europe began to see higher replacement costs, the aggressive offering seen during February disappeared, and by the end of April these sellers were beginning to talk of higher prices on the horizon.
However, domestically produced material was also in good supply while imports from the US were also taking place, while the actual impact of the Russian turnarounds on Baltic supply was a matter of debate; not all Baltic sources were agreement that supplies had tightened to the extent some others were suggesting. In any case, significant price increases in the European domestic market had failed to materialise by the time of writing, although, with crude oil having firmed up, such increases appear inevitable at some stage.
Exports from Europe were fairly unexceptional at this time and prices were again largely stable. Prices in Europe remained too high for workable arbitrages to many key destinations, such as India or Asia Pacific, and Nigeria remains blighted by a severe shortage of US dollars that has impeded importers, although this problem is easing.
Group II and III base oils decreased in price during this time period although, at the time of writing, both had appeared to find the floor.
In both cases, supply in Europe was bolstered by imports from Asia Pacific. In the case of Group III, the usual trade flow from Asia to Europe was increased because of oversupply and weak prices in the latter market, and it is understood that refiners there were keen not to weaken the Asian market any further.
The majority of Group II supply in Europe is from the US, but with the Asia Pacific market also under-strength for Group II as for Group III, US material was supplemented by Asian imports, and this pressured European prices of the lighter grades. Production problems at a US refiner tightened 600N availability and this grade did not see the same pressure as a result.
Asia Pacific is no longer as weak for both Group II and Group III and volumes to Europe are expected to decrease, which should create a pricing floor.
Ross Yeo Senior Editor Manager (Europe) ICIS
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LUBE MAGAZINE NO.133 JUNE 2016
51
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