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
The European Group I base oil market has started to firm up after several months of weakness. Support for prices has come largely through tightening supply rather than any substantial increase in demand. This reduction in availability is the result of many refineries being operated at below-maximum rates for several months now, and a maintenance programme in Russia, during which four refineries were taken offline simultaneously. Group III supplies may also be tightening, with importers sending fewer volumes to Europe in light of better netbacks in Asia.
The US base oils market is coming out of a period of oversupply for Group I and Group II, with price increases filtering into the Group II tier in March. The market outlook remains uncertain because of the pending commercial start-up of the new 25,000 bbl/day Chevron base oil unit at Pascagoula, Mississippi, which is expected to begin commercial operations by mid-year. High vacuum gas oil costs bit deeply into base oil margins, prodding Group I producers to crack crude oil directly to fuels and encouraging additional exporting of Group II material.
Asia’s base oils spot prices are expected to remain stable-to-firm during the second quarter on the back of limited spot availability, especially for Group I’s SN150, brightstock and Group II’s 150N material. Meanwhile, some market players said that high-viscosity grades 500N and 600N material from Group II, which are ample in supply throughout Asia, might observe a price rebound in the second quarter on the back of improved demand from the key market China. The Chinese market traditionally sees better demand for 500N/600N cargoes when they switch to using high-viscosity material with the onset of summer.
Updated to mid-April 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.