Base oils supplement: Prices see sharp slide from mid-2011 peaks

Base oil prices declined in global markets from the middle of last year, as demand softened, forcing some producers to cut back production. The reversal came after several years of steadily climbing prices, on the back of continuing high crude oil pricing and recovered demand after the 2008-2009 downturn.

The outlook for 2012 for the European Group I base oils market is still largely ­uncertain but there are hopes of a firmer pick-up from February or March, according to ­market sentiment.

Some slight increases have been seen in Baltic export prices already this year, on firmer demand and reduced production.

The European market is expected to achieve some stability early in the first quarter of 2012, before improving during March as demand for lubricants rises.

In North America, prices also fell from mid-year, but the markets look to be entering a period of more stable demand and pricing.

The US base oils market will be looking toward lighter grades and more re-refining in 2012. While US production remains dominated by Group I base oil stocks, increasing demand for lighter viscosity grades are pushing up the need for Group II, II+ and III base oils.

In Asia, the surge in base oil prices that occurred in the first half of 2011 is unlikely to be repeated in the same period this year, with a lighter refinery turnaround schedule and an uncertain global economic climate.

Supply conditions in Asia are expected to be healthier this year, as there will be fewer turnarounds at regional facilities, participants say. Around 10 base oil facilities in Southeast Asia, South Korea, Taiwan and Japan – all key exporters to China – will be shut for maintenance in 2012, versus about 15 shutdowns in these countries last year.

Most market players expect base oils demand in China to improve after the 22-28 January Lunar New Year holiday, as buyers will likely build stocks to prepare for the March-May oil change season. “It’s still going to be a buyers’ market, at least in the first half of the year,” says one trader.

ICIS BASE OILS & LUBRICANTS EVENTS 2012

ICIS is holding its regular series of global base oils and lubricants events in 2012.

The dates and venues of the meetings for which dates have been confirmed for this year are as follows:

The 6th ICIS Asian Base Oils & Lubricants Conference

• Early June 2012
  Singapore

The 9th ICIS Middle Eastern Base Oils & Lubricants Conference

• 9-10 October 2012
  Dubai, United Arab Emirates

The 8th ICIS Pan-American Base Oils & Lubricants Conference

• 29-30 November 2012
  New Jersey, US

For information about these ICIS Base Oils & Lubricants conferences, please contact Emily Partington

ICIS is also holding a series of base oils training events in 2012, with sessions in London, Houston, Singapore, Guangzhou, Abu Dhabi and New York. For details, please contact Alan Tyler.