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Base oils-Lubes: Market overview
Updated to Q1 2018
Supply of base oils in Asia is poised to remain low in Q1 2018 because of turnarounds at two South Korea-based major Group II and III base oils producers' units in March. However, there could be an increase in spot cargo availability if a Middle East-based Group II maker starts up in the first quarter, though further information on this is not immediately available.
Demand In Asia is expected to rise in the earlier part of Q1 2018, ahead of the Lunar New Year, as buyers typically stock up before the festive holidays. After February, demand would usually wane as seen in the earlier years. However, demand for the first quarter is not expected to dip significantly as inventories of most buyers remain lean because of the largely tight supply during the Q4 2017.
Updated to Q4 2017
Better Group I domestic European availability than over the summer is expected from European and Russian refineries in the fourth quarter. Expectations for Group II supply are difficult given the lack of clarity on Hurricane Harvey’s impact. Should problems persist, this may be a grade in which supply decreases. Going into Q4, Group III base oils should have increased supply for OEN-unapproved material as previous production issues now resolved. Supply in the Baltic Sea export market is set to improve over the next quarter as demand from the domestic Russian market dies down following the end of the agricultural season in the country.
Domestic Group I demand is expected to be stable-to-strong, with finished lubricants consumption described as healthy going into the fourth quarter. An overflow of demand for Group I and Group III is a potential result of shorter Group II supply, should US imports continue to feel the effects of Hurricane Harvey. Some Group III suppliers have high expectations for demand in the fourth quarter. It is currently unclear whether these expectations will be met. The outlook for demand in the Baltic Sea and Black Sea export markets is likely to remain steady, with no upswing in buying interest from Turkey imminent.
Pushed by the effects of Hurricane Harvey, North American base oil supply is tight from major outages.
Fourth-quarter demand is expected to remain steady.
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.