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Updated to Q4 2019
European Group I availability should increase during the fourth quarter as refineries in France resume production following strike action. A lack of export options for European Group I product could continue to see ample availability in Europe amid a backdrop of sluggish buy interest. Competitively priced Russian Group I material could also impact availability in Europe as export options for this material also remain limited.
Buy interest for European Group I material is likely to remain steady during the fourth quarter, although could decrease towards the end of the year as players look to optimise inventory levels. In addition, there could be some cautious buying attitudes in the market as a result of the approach of International Maritime Organisation (IMO) 2020 regulations. These may impact the base oils market next year because of the potential for changes in refinery output.
The outlook for supply of Group II product during the fourth quarter remains unclear for now with a possibility that competition could continue to grow. Imports, predominantly from the US, continue to flow into Europe. At the same time, the new domestic production capacity in Rotterdam is not yet believed to be running at full rates. This Rotterdam plant is said to have an annual capacity of between 900,000 to 1m tonnes.
Although there is a gradual shift away from Group I product to higher numbered base stocks, demand for Group II material is unlikely to grow suddenly or particularly significantly in the fourth quarter. European emissions regulations favour higher quality and efficiency oils, which should be giving a gentle nudge towards higher numbered base stocks such as Group II. However, with year-end approaching, players could adopt a more cautious buying attitude as the fourth quarter progresses.
The supply of Group III material could slow during the fourth quarter as a result of planned maintenance in October. Maintenance is expected at a 330,000 tonne/year plant in Malacca, Malaysia, between October and December. In addition, planned maintenance is also taking place at a plant in Cartagena, Spain, during the first two weeks of October. Whether the turnarounds will have an impact on supply remains unclear, due to them being planned.
Demand for Group III product in Europe remained healthy for most of 2019, with no significant change expected imminently. However, buying interest could soften in the fourth quarter as the year-end approaches and players look to optimise inventories. There is a gradual shift away from Group I material in Europe so there is potential for demand for higher-numbered base stocks to grow. But whether this will happen quickly and noticeably remains to be seen.
We offer the following regional Base oils-Lubes analysis and news coverage to keep you informed of factors and developments affecting prices in the Base oils-Lubes marketplace.
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