Base Oil Report
The base oils market in Europe began 2016 strangely subdued given the unusual circumstances that have emerged. The market is beset by opposing influences and the result has largely been inertia underlined by uncertainty.
Two events of major potential consequence are the closure of Group I base oil production at Shell and Kuwait Petroleum’s refineries in the Netherlands. Both were scheduled to finish production at the end of 2015 but Kuwait Petroleum continued to producer heavier viscosities until the end of January while Shell is widely rumoured to be continuing one of two lines for the first half of 2016.
Nevertheless, the reduced capacity means a major change to Group I availability. Those consumers that have less stringent quality considerations will either switch to imports of Russian Group I, which are expected to rise in volume, or seek out the remaining domestically produced European Group I.
Those consumers for whom Russian Group I is of too low quality may be tempted to switch to Group II, imports of which are also expected to rise. In
2015, the majority of Group II in Europe came from a single US refiner but a second is expected to join in 2016, while oversupply in Asia Pacific and the potential for growing demand in Europe may also see Asian Group II arrive.
Yet while the capacity closures would be expected to support the market and lead to higher prices, they have coincided with the profound collapse in crude oil values and growing global economic pessimism that have weighed on the base oil market in the other direction.
Furthermore, the global weakness of base oil prices means that export opportunities have all but vanished. This has led to the unusual situation in the export market where prices are too high for exports to take place, but refiners have little interest in reducing offer prices as they wait for the tightness to kick in domestically. Meanwhile, buyers in other regions look at the plummeting crude oil prices and cannot fathom why base oils have not followed suit.
Indeed, the capacity closures may well represent the beginning of the end for the European export market. Europe has traditionally been long on Group I, which it exports, and short of Group II and Group III, which it imports. But the
closures will reduce the surplus of Group I, meaning less room for exports, from northwest Europe at least.
Meanwhile, Group II base oils appear well set to continue increasing their European market share, taking advantage of the supply gap created by the Group I closures. Indeed, one major trader that until now has focused on Group I exports said that lack of opportunities there had lead it look at importing Group II instead.
Group II has good global availability and is closer in specifications and price to Group I than is Group III, making it a more obvious replacement. Group III imports are also expected to continue flowing to Europe and may even increase in volume, given the oversupply and low pricing in Asia Pacific.
Ross Yeo Senior Editor Manager (Europe) ICIS
LINK
www.icis.com
High quality presentation program. First class speaker line-up. International Exhibition. Excellent networking. Safety to the max – latest developments of condition monitoring
Lubrication per excellence – Tipps & tricks from maintenance experts Getting things done – Optimize your selection, handling & storage of lubrican Let’s talk about lubricants & tribology
ntts
www.oildoc-conference.com
Get to know all recent developments Be prepared for future opportunities and risks Meet the international key experts at one event Excellent networking opportunities and workshops Top social events and little Oktoberfest Just 50 km from Munich, Innsbruck and Salzburg and its international airports
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 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65
