Base oils-Lubes Prices, markets & analysis
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Base Oils-lubes overview Transcript
Base Oils are a synonym for base-stocks, they are mixed with additives to form finished lubricants. Biggest end-use is the automotive sector and there’s a big trend right now for higher quality base stocks, so we’re actually seeing some consolidation of our Group 1 Base Oil plants and a bigger move to Group 2, Group 3 and even gas-to-liquids plants.
Automotive emission standards are the biggest factor affecting base oils.
There’s also a seasonality factor. Heavy drive season that’s usually May to September, that’s when demand is the strongest for base oils.
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Base oils-Lubes: Market overview
In Asia, most market participants foresee a strong buyers’ market from the oversupply situation with the backdrop of new capacities scheduled to come on line through 2014. Asian refiners’ already tight margins is likely to be further depressed. Asian base oil producers had already contended with squeezed margins and losses in the second half of 2013 because of oversupply in the region, amid volatile feedstock fuel oil and gasoil prices.
Traditional pick-up in buying interest ahead of the Lunar New Year festivities in late January is also expected to boost restocking in export markets such as Thailand, Indonesia, Japan, South Korea and Taiwan across all grades of base oils
US base oils are facing supply challenges in the first quarter, awaiting the full on stream operation of Chevron’s Group II Pascagoula Base Oil Plant (PBOP). PBOP entered mechanical start-up procedures late December/early January, with market participants expecting commercial output from the 25,000 bbl/day plant later in the quarter. Lower crude oil prices prompted Motiva to reduce its posted prices effective 10 January 2014, underscoring the price drift that began in the fourth quarter.
The European base oil prices are more likely to increase than decrease in the first quarter of 2014, with most participants believing the market bottomed out at the close of 2013. However, significant increases are dependent on improved demand, both in the domestic and export markets. Increased EU duties on Russian imports could support prices.
Updated to mid-Jan 2014
News & analysis
Base oils-Lubes news & analysis
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Base Oils-Lubes Methodology
About Base oils-Lubes
Base oils are the main component of finished lubricants and are derived from the heavy crude oil fraction in vacuum distillation. They are refined to impart physical and chemical properties that will make a good lubricant. Most base oils are combined with small amounts of chemical additives to form the finished lubricants such as motor oil.
The traditional method of making base oils involves solvent extraction to remove aromatic compounds and solvent dewaxing to take out unwanted waxes. More recently hydroprocessing techniques employing hydrogen and catalysts have been used to make base oils.
Group I base oils which are mostly produced by solvent processing are used in less demanding applications. Group II and III base oils are produced by hydroprocessing and used in higher performing lubricants. Group IV base oils are synthetic oils typically based on polyalphaolefins (PAOs). Group V oils are used in the formulation of oil additives.