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
Updated to Q4 2015
European Group I base oil prices are expected to be stable-to-soft during the fourth quarter. Substantial feedstock prices during the summer were not adequately reflected in the downstream base oil market and production margins are very healthy. Pressure from low feedstock prices may have been curbed, however, following a crude rally in early October. Demand also traditionally slows in the second half of the fourth quarter and this normally elicits a negative price reaction. While the seasonal demand slow-down is expected, the price reaction may be muted because of their already low levels compared with previous years.
Ample supply of light viscosity base oils prevails in the Americas’ market during the fourth quarter of 2015 and is expected to be a factor going into 2016. The fall in crude oil prices hit the base oil market, pulling down light- and mid-grade prices, but not the heavy viscosity grades. This is partially due to the ongoing production choices affecting these grades, but also due to subdued demand for light grades in the export market. Group II dominance continues to define the Americas base oil market, with the US Gulf coast a primary global exporting area.
Spot prices of base oils in Asia are poised to remain stable-to-soft going into the fourth quarter, as tepid demand continued to exert downward pressure on buying ideas and hamper spot trade. Sluggish economic conditions such as the devaluation of Asian currencies against the US dollar also weighed on import interest, especially since some refiners also cut their domestic prices to protect their respective local markets from competition posed by import cargoes. Furthermore, some Asian refiners that were earlier in shutdown maintenance were also due to return to the spot market in the fourth quarter, which would potentially add to supply amid the prevailing slow demand conditions.
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.