Europe base oils trade slows as players fear indirect effect of tariffs

LONDON (ICIS)–Trading interest dipped on the European Group I base oils market this week, as the ongoing US trade tariffs made some market participants hesitant.

The growing lack of clarity has become an unwelcome aspect of market conditions.

This week, domestic Group I prices failed to show any movement, with pricing information heard in the market within published ICIS ranges. Some traders were also away from their desks ahead of the Easter holiday.

Brightstock remained in tight supply, while demand for SN500 rose slightly. SN150 continued to face competition from re-refined base oils in Europe, though less than in previous months.

A source voiced concerns over the growing volatile situation in wider commodity markets as financial and currency markets react to news from The White House. “The market is crazy and we need to see what will happen,” they said.

“Stability would be nice,” they added.

The US tariffs upheaval is bound to ripple into all commodities, though some impact is indirect. Furthermore, retaliatory measures from the EU would impact US goods heading to Europe. But base oils are exempt from tariffs, along with oil and oil products. But an impact may be felt in the base oils market if the wider world demand outlook suffers and if the global economy is hit. Long-term commitments in contracts are also being avoided in other chemical markets.

Last week’s announcement of a 90-day pause on the implementation of the latest tariffs round, except for China, partly eased investors’ concerns.

With the US-China trade war escalating and new US sanctions being announced on Iran, crude oil prices were also reacting. With base oils being derived from vacuum gasoil, a key oil product, this may mean some indirect impact on the base oils market. On Thursday, crude oil prices were on the rise as the new US sanctions targeted the export of Iranian oil, focusing on shippers and importers in China.

Base oils are used to produce finished lubes and greases for automobiles and other machinery.