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 Q1 2015
European base oil prices look set to continue the downward trend from end- 2014 at least during the opening stages of the first quarter. The downturn was largely driven by collapsing crude oil prices and increasing pressure from new Group II production, and buyers are acutely aware that refinery margins give room for further base oil price reductions. Demand was underwhelming in the fourth quarter and although early January demand has been promising, it remains to be seen if this will persist beyond a brief period of restocking.
Asia’s base oil prices are poised to extend declines in the first quarter, tracking hefty slides in upstream crude values amidst supply overhang. Buyers remained cautious in their procurement of cargoes, preferring to buy on a need-to basis to prevent build-up in their inventories and minimise risks of losses. The upcoming Lunar New Year in key market China is expected to see some restocking activity, but market players expressed limited optimism over significant upward pressure on base oil spot prices. However, some market players said that the slide in prices might not be as drastic because of an upcoming turnaround at a northeast Asia-based Group II base oil unit in March, which would tighten supply.
There is little opportunity in January for price recovery following dramatic drops in base oil prices during the fourth quarter. January demand is typically slow and more so for 2015 because of the upstream uncertainties. February and more particularly March are expected to see improved demand in preparation for the active US driving season that begins in the second quarter.
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.