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Viewpoint: Ample supply to weigh on base oils market

  • : Oil products
  • 24/12/18

European base oil prices are likely to fall further in 2025 on a persistent global supply overhang of Group III material and weaker demand for Group I spot supplies.

European Group III spot prices with varying approvals face downwards pressure as overseas producers target European buyers supported by attractive margins and ample spot supplies.

Stricter emission standards and engine oil specifications have supported a switch towards more premium base oils such as Group II and III away from Group I production, which is in long-term decline.

Prices for fca northwest Europe (NWE) Group III 4cst and 6cst supplies with partial or no approvals fell by 16pc and 13pc to €1,125/t and €1,185/t, respectively on the week ending 13 December 2024, the lowest levels since April 2021.

Rising Chinese domestic Group III production capacity has slashed the country's requirements for supplies from South Korea and the Mideast Gulf, incentivising suppliers to look towards the European market.

Buying appetite for tenders out of Bahrain has also increased and spot supplies have arrived at more competitive levels. This has spurred other suppliers to lower offers further as they look to remain competitive and claim market share before the conclusion of upcoming Group III refinery expansions in 2025.

The Mideast Gulf has an estimated Group III production capacity of 2mn t/yr. This is set to increase with state-controlled Saudi Aramco's base oil subsidiary Luberef focusing on expansion projects at its Yanbu facility. This will increase nameplate capacity by 76.2pc, to approximately 1.3mn t/yr of base oils by 2025.

Europe remains the most attractive export outlet owing to smaller Group III production capacity in comparison to other regions. Europe has an estimated nameplate base oil capacity of 7mn t/yr, of which 13pc is Group III.

A shift away from Group III imports in the US has further supported Mideast and South Korean suppliers to redirect supplies from this region and towards Europe.

An announcement by Shell to convert its hydrocracker at its 147,000 b/d Wesseling refinery in west Germany into a Group III base oil production unit looks to increase domestic output by 300,000t/yr. But production is only anticipated to begin in 2026-2028, leaving European buyers mostly dependent on imports in 2025.

European demand has plummeted thanks to amply supply levels — leading to a continuous wait-and-see approach from traders as they anticipate prices to fall further. Participants have reported term contracts finalised at price levels well below year ago levels and anticipate spot prices in 2025 to drop as a result.

European Group I nameplate capacity has fallen by 55pc over the last decade to around 4mn t/yr owing to refinery closures, according to Argus calculations.

In 2024, Eni's Group I 600,000 t/yr Livorno unit shut, and there were several refinery fires and outages elsewhere in Europe. But despite tighter spot supplies, prices fell because of weaker demand.

Demand is anticipated to fall further in 2025 as producers prioritise output of more premium base oil. This includes Polish firm Orlen's Gdansk refinery expansion, adding a group II base oil unit with an estimated capacity of 400,000t/yr of Group II.

Exxonmobil also announced that it will produce a high-viscosity Group II alternative to the Group I bright stock grade by 2025 out of its Jurong refinery in Singapore.

Bright stock currently has no alternative, which supports its production. But Exxon's announcement is likely to weigh on refinery output and shrink the Group I market further.


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Trump announces plan for 'reciprocal' tariffs: Update

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ACBL sets release dates for Illinois River lock


25/02/13
25/02/13

ACBL sets release dates for Illinois River lock

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Trump announces plan for 'reciprocal' tariffs


25/02/13
25/02/13

Trump announces plan for 'reciprocal' tariffs

Washington, 13 February (Argus) — President Donald Trump said today he would impose "reciprocal tariffs" on imports from an undisclosed number of countries sometime in the future, a move that could affect imports of ethanol and likely many other energy commodities. The idea behind the next major wave of tariffs Trump plans to unveil is to raise the US import tariffs to the same level foreign countries charge on exports from the US. Trump's trade advisers previously cited Brazil's tariff on US-sourced ethanol, which is higher than the US customs duty on ethanol, as an example of the disparity they would attempt to address. "They charge us a tax or tariff, and we charge them the exact same tax, very simple," Trump told reporters at the White House. As with his first tariffs against Canada and Mexico — paused until 4 March — and against China, which went into effect on 4 February, there is a great deal of regulatory uncertainty on how the tariffs will be implemented. "Nobody knows what that number is, unless you go by the individual country, and you can see what it is," Trump said. Trump's directive does not set a specific deadline for when the reciprocal tariffs will be imposed. The intent of the order is to force foreign countries to lower their tariffs against the US. But that outcome is not guaranteed. Trump's 10pc tariff on imports from China, and Beijing's more limited counter-tariffs, went into effect this month despite his claim that he would quickly negotiate with Beijing to avert a trade war. In what is becoming a norm with the tariff announcements, the Trump administration is alternatively downplaying inflationary effects of such tariffs, or casting any negative effects as justified. "Last year, US-based companies paid foreign governments $370bn in taxes," White House National Economic Council director Kevin Hassett said today. "Meanwhile, foreign companies paid the US $57bn in taxes. Are we supposed to keep doing that because of some economic model that doesn't have the whole real world in it?" The White House, at least, no longer rejects descriptions of tariffs as a tax, even though it continues to insist that only foreign exporters — not US consumers — will be paying it. Trump has imposed a 25pc tariff on imported steel and aluminum that will become effective on 12 March. He set a deadline of 1 April for all US government agencies to investigate the causes of "our country's large and persistent annual trade deficits in goods" — a review that likely will result in additional tariffs later this year against imports from the EU, UK, India, Vietnam and other major economies. The large deficit the US runs in trade in goods with India will be a subject of Trump's meeting later today with Indian prime minister Narendra Modi. The US expects India to step up purchases of crude and other energy commodities to better balance bilateral trade. Trump likewise told Japan's prime minister Shigeru Ishiba last week that Tokyo should ensure that Japanese energy companies source more US oil, LNG and ethanol to "get rid of" the US' trade deficit with Japan. By Haik Gugarats Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

US tariffs would cut midcon refinery runs: PBF


25/02/13
25/02/13

US tariffs would cut midcon refinery runs: PBF

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