Group I base oil supply improving in Europe

05 February 2008 14:14  [Source: ICIS news]

LONDON (ICIS news)--Group I solvent neutral base oil availability in Europe is beginning to improve following a prolonged period of tightness as producers reduced rates and diverted material, producers and traders said on Tuesday.

“We forecast more product around. The numbers are starting to make sense. We reached break-even or even a small profit, so refiners that reduced their rates like us will want to get back to normal production,” one producer said.

“We are still asking a good premium though as there are not many suppliers in a position to sell prompt,” the source added.

With base oil pricing slow to react to the steep rises in crude oil and feedstock markets at the end of 2007, several European producers had reduced their base oil rates or diverted product to the gas oil pool due to better refining economics.

Recently, however, crude and feedstock vacuum gas oil prices have declined, while base oil values have been climbing slowly providing better returns.

Traders confirmed there were more export barrels on offer in February, but that asking prices remained high.

Spot export pricing for solvent neutral 150 was assessed at $835-850/tonne (€559-570/tonne) FOB (free on board) EUR, according to global chemical market intelligence service ICIS pricing.

“They are all asking for a premium and some are very stubborn on plus $20/tonne. I don’t see this working though. There are export markets which can accommodate these volumes, but not at those levels,” one trader said.

While availability of solvent neutrals was improving, brightstock remained in short supply, market participants said.

($1 = €0.67)

By: Shelley Kerr
+44 20 8652 3214

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