FocusEurope Group I base oil markets stall on demand concerns

04 October 2012 14:35  [Source: ICIS news]

By Carl Roache

LONDON (ICIS)--Lacklustre demand, ample supply and limited export options have seen European Group I base oil markets stall, sources said this week.

European Group I domestic base oil prices declined between $20-30/tonne (€16-23/tonne) this week depending on grade, while European Group I export prices stagnated, signifying the end of the recent uptrend.

“The market is a bit quiet. I do not get as many phone calls as some time ago. October should be a month where there is activity. Let’s see,” said a southwest European base oil producer.

The major driving factor in the lacklustre domestic market is poor finished lubricant demand.

This poor offtake is evidenced by recent statistics from the European Automobile Manufacturers’ Association, which showed that new passenger car registrations were down by 8.9% in August year on year, and down 7.1 % year on year for the first eight months of 2012.

For one northwest European producer, the lack of demand from the German automotive sector was its biggest concern.

“The finished lubricant demand is very flat,” it said.

Northwest European finished lubricant manufacturers continue to talk of a tough marketplace.

Recent price declines upstream have also contributed to the weaker base oil market sentiment.

“We are pushing for higher prices for October but customers are more or less reluctant because they have seen the development downwards of crude oil and vacuum gasoil (VGO),” explained a northwest European base oil producer.

For European Group I base oil exporters, the global picture is offering little support, with limited trade opportunities available.

“People are hesitant to accept current [price] levels, there’s uncertainty,” said a west European trader.

There are sporadic enquiries circulating for the Americas and west Africa, but the Middle East and Asia are quiet.

In Asia this week, Group I prices were stable or weaker amid subdued trade and poor demand.

“It is quite boring really,” said a south European producer and regular exporter.

“It is not moving a lot.”

Turkey is one of the few active import markets, but competition is fierce with offers coming in from several origins including the Black Sea and South America.

On the European Group III market, abundant supply and stiff competition among sellers weighed down base oil prices, with reductions of €30/tonne seen this week.

“The European market is imbalanced. This is the main reason [for the decline]. The second reason is that industry is a bit sluggish,” explained a Group III base oil distributor.

($1 = €0.78)

By: Carl Roache
+44 20 8652 3214

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