Rising base oil margins could push output up

: Oil products
25/03/25

Base oil premiums to feedstock vacuum gasoil (VGO) in Europe are holding firm, which could push refiners in the region to favour base oils production over diesel.

The Argus-assessed European Group I domestic SN 150 spot price premium to vacuum gasoil (VGO) 2pc northwest Europe on a fob basis hit $327.28/t last week, compared with a diesel to VGO premium of $108.38/t in the same period. The differential between the base oil premium to VGO and diesel to VGO has held at well over $100/t since the start of February, which could start incentivising more base oil output. Refiners typically start prioritising base oil production over diesel when the differential between the base oil and diesel premiums to VGO holds at $100/t or above for a period of time, especially when VGO feedstock prices rise.

Supplies of VGO, diesel and base oil have tightened because of sanctions on Russian products, with refiners relying on other importers further afield for VGO, which has supported prices. VGO arrivals in Europe fell by 36pc from 2021 to 7mn t in 2024, Vortexa data show, with monthly VGO arrivals dwindling further from last November to February. European VGO premiums to Ice Brent crude futures have more than doubled from $6.50/bl to $14/bl on a cif ARA basis.

As well as feedstock availability constraints, weaker buying interest for diesel, in contrast to firming base oil demand, is another factor that could push refiners to prioritise base oil production. Consumers switching to gasoline, hybrid and electric vehicles and a weakening European industry is weighing on diesel demand across the region. And diesel margins to VGO could come under further pressure from higher diesel imports in Amsterdam-Rotterdam-Antwerp (ARA) in March, supported by more tankers taking the Red Sea route and the end of refinery maintenance season. This could contribute to make base oils margins more attractive to European refiners.

But Yemen-based Houthi forces have said that they will restart attacks on commercial shipping, prompting some clean tankers to divert away from the Red Sea route. This could support diesel prices and margins should supplies tighten again, and turn European refiners' focus back to diesel production over base oils.

But over the last decade an estimated 55pc of European Group I nameplate capacity has been cut, creating a structurally short market. And last year saw the closure of Eni's 600,000t/yr Livorno refinery, further cutting supplies, boosting spot prices and incentivising producers to increase output.

By Christian Hotten, Josh Michalowski and Isabella Reimi

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25/05/02

Shell’s 1Q European gas production up

London, 2 May (Argus) — Shell's European gas production for sale in January-March slightly stepped up on the year, but the company expects works to limit global oil and gas production this quarter. Shell produced 24.9mn m³/d in the first quarter, up from 24.8mn m³/d a year earlier but below the 25.2mn m³/d in fourth-quarter 2024. Shell has stakes in UK and Dutch fields, as well as a 17.8pc share in Norway's Ormen Lange field and an 8.1pc stake in the giant Troll field. Output from the two Norwegian fields was down on the year in January-February, the latest months for which data are available. Ormen Lange produced 19.8mn m³/d in January-February, down from 22.6mn m³/d a year earlier. Troll production averaged 123.6mn m³/d over those two months, also down from 126.2mn m³/d a year earlier. Shell's integrated gas business was the company's top performing segment with profits of $2.8bn, slightly higher on the year. Lighter maintenance at the Pearl gas-to-liquids plant in Qatar supported production, but unplanned works and weather constraints in Australia left the company's LNG volumes at 6.6mn t in January-March from 7.6mn t a year earlier, Shell said. Meanwhile, Shell's upstream division posted $2.1bn in profit, down 8.5pc on the year earlier but double compared with the fourth quarter 2024. The segment was hit with a $509mn tax bill related to the UK's Energy Profits Levy in the first quarter, partially offset by gains from asset sales. Across the entire company, Shell reported first-quarter profits adjusted for inventory valuation effects and one-off items of $5.6bn, surpassing analysts' expectations of $5.3bn . Shell's first-quarter worldwide oil, liquids and gas production was 2.84mn boe/d, down from 2.91mn boe/d a year earlier but up from 2.82mn boe/d in the previous quarter. The company expects lower oil and gas production this quarter in a 2.45mn-2.71mn boe/d range because of maintenance across its integrated gas portfolio and an absence of volumes from its SPDC business in Nigeria, which Shell sold off in March. By Aleksandra Godlewska and Jon Mainwaring Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Shell’s 1Q profit falls but beats expectations

25/05/02

Shell’s 1Q profit falls but beats expectations

London, 2 May (Argus) — Shell's Integrated Gas business segment delivered a solid performance in the first quarter, helping the UK major exceed analysts' earnings estimates despite ongoing struggles in its downstream Chemicals and Products business. Shell reported a first-quarter profit of $4.8bn, down from $7.4bn a year earlier. Adjusted for inventory valuation effects and one-off items, profit was $5.6bn, surpassing analysts' expectations of $5.3bn. Integrated Gas was Shell's top-performing segment, with a profit of $2.8bn, slightly higher than the first quarter of 2024. Production was down by 6.6pc year-on-year at 927,000 b/d oil equivalent (boe/d), but up 2pc from the previous quarter. Less maintenance at the Pearl gas-to-liquids plant in Qatar had a positive impact on production, Shell said. But the company's LNG volumes were affected by unplanned maintenance and weather constraints in Australia, falling to 6.6mn t from 7.6mn t a year earlier. The Upstream segment posted a profit of $2.1bn, down by 8.5pc on a year earlier but double what it made in the fourth quarter of 2024. The segment was hit with a $509mn tax charge related to the UK's Energy Profits Levy in the first quarter, partially offset by gains from asset sales. Production for the segment was slightly down compared to a year earlier at 1.86mn boe/d, partly due to the divestment of Shell's SPDC business in Nigeria. Overall, Shell's first-quarter production was 2.84mn boe/d, down from 2.91mn boe/d a year earlier but up from 2.82mn boe/d in the previous quarter. Shell expects lower production in the current quarter, ranging from 2.45mn boe/d to 2.71mn boe/d due to maintenance across its Integrated Gas portfolio and the absence of volumes from the SPDC business. The Chemicals and Products segment reported a $77mn loss for the first quarter, compared to a $1.3bn profit a year earlier. Refinery runs were down by 4.8pc year-on-year, and chemicals sales volumes were marginally lower. Despite persistent low margins in the downstream, Shell noted that refining and chemicals margins improved compared to the fourth quarter. Shell expects capital spending for 2025 to be within a $20bn-$22bn range, in line with last year's spending. The company is maintaining its dividend at 35.8¢/share and its share buyback programme at $3.5bn a quarter. By Jon Mainwaring Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

US bill would extend expired biofuel credits

25/05/01

US bill would extend expired biofuel credits

New York, 1 May (Argus) — Legislation soon to be introduced in the US House would extend expired biofuel incentives through 2026, potentially providing a reprieve to refiners that have curbed production this year because of policy uncertainty. The bill, which will be sponsored by US representative Mike Carey (R-Ohio) and some other Republicans on the powerful House Ways and Means Committee, according to a person familiar, could be introduced as soon as today. It would prolong both the long-running $1/USG for blenders of biomass-based diesel and a separate incentive that offers up to $1.01/USG for producers of cellulosic ethanol. The credits expired at the end of last year but under the proposal would be extended through both 2025 and 2026. The incentives would run alongside the Inflation Reduction Act's new "45Z" credit for clean fuel producers, which offers a sliding scale of benefits based on carbon intensity, though the bill would prevent double claiming of credits, according to bill text shared with Argus . The 45Z credit is less generous across the board to road fuels — offering $1/USG only for carbon-neutral fuels and much less for crop-based diesels — and is still in need of final rules after President Joe Biden's administration issued only preliminary guidance around qualifying. The proposal then would effectively offer a more generous alternative through 2026 for biodiesel, renewable diesel, and cellulosic ethanol but not for other fuels that can claim the technology-neutral 45Z incentive. That could upend the economics of renewable fuel production. Vegetable oil-based diesels for instance could claim the blenders credit and earn more than aviation fuels that draw from the same feedstocks. According to Argus Consulting estimates, aviation fuels derived from wastes like distillers corn oil and domestic used cooking should still earn more than $1/USG this year, conversely, since 45Z is more generous to aviation fuels. Extending the biodiesel blenders credit would also allow foreign fuel imports to again claim federal subsidies, a boost for Finnish refiner Neste and the ailing Canadian biofuel startup Braya Renewable Fuels but a controversial provision for US refiners and feedstock suppliers. The 45Z incentive can only be claimed by US producers. The blenders incentive is also popular among fuel marketer groups, which have warned that shifting subsidies to producers could up fuel costs. The proposal adds to a contentious debate taking place across the biofuel value chain about what the future of clean fuel incentives should look like. Some industry groups see a wholesale reversion to preexisting biofuel credits — or even a temporary period where various partly overlapping incentives coexist — as a tough sell to cost-concerned lawmakers and have instead pushed for revamping 45Z. A proposal last month backed by some farm groups would keep the 45Z incentive but ban foreign feedstocks and adjust carbon intensity modeling to benefit crops. Republicans could keep, modify, extend, or repeal the 45Z incentive as part of negotiations around a larger tax bill this year. But the caucus is still negotiating how much to reduce the federal budget deficit and what to do with Inflation Reduction Act incentives that have spurred clean energy projects in conservative districts. Uncertainty about the future of biofuel policy and sharply lower margins to start 2025 have led to a recently pronounced drop in biodiesel and renewable diesel production . President Donald Trump's administration is working on new biofuel blend mandates, which could be proposed in the coming weeks, but has said little about its plans for biofuel tax policy. By Cole Martin Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Nigeria’s Warri refinery restart threatened by strike

25/05/01

Nigeria’s Warri refinery restart threatened by strike

Lagos, 1 May (Argus) — Plans to restart a section of Nigeria's 125,000 b/d Warri refinery are at risk due to an indefinite strike planned by plant support staff starting on 5 May. The strike is in protest against casualisation, low pay and lack of benefits. A source at the refinery told Argus last week that state-owned NNPC intends to restart the crude and vacuum distillation units (CDU and VDU) and a gas plant in the first week of May. But the support staff have timed their strike to disrupt these plans. Support staff representative Dafe Ighomitedo said the striking workers make up two-thirds of Warri's staff and have been protesting their employment terms since 2015. The refinery has been undergoing a $492mn quick-fix repair contract with South Korean engineering firm Daewoo since June 2022 to restore 60pc of its nameplate capacity. A previous strike called in April 2022 would have delayed the start of the quick-fix programme, but it was called off following appeals from community leaders and a promise from refinery management to address the workers' demands if they supported the programme, Ighomitedo said. Workers were promised an improved salary structure upon the refinery's restart but that promise has not been fulfilled, he added. NNPC did not respond to Argus' requests for comment. NNPC restarted Warri in December last year and crude runs had ramped up to about 78,000 b/d before the refinery was shut again in January "to carry out necessary intervention works on select equipment, including field instruments that were impacting sustainable and steady operations", the company said. NNPC cancelled crude oil allocations to Warri in February and March, reoffering the volumes for export, but said last month that all units at the refinery would be online within a year. By Adebiyi Olusolape Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Construction firms see tepid private demand in 2025

25/04/30

Construction firms see tepid private demand in 2025

Houston, 30 April (Argus) — Building materials suppliers Martin Marietta and Vulcan Materials anticipate market uncertainty and elevated interest rates to hamper private construction demand this year. Some large commercial projects have been paused because of macroeconomic volatility stemming from US trade policies, according to remarks made by Vulcan's chief executive Tom Hill on an earnings call today. The current interest rate environment is also expected to stifle residential construction activity this year, according to Hill. The CME FedWatch tool showed a 95.5pc probability that the US Federal Reserve would hold its target interest rate steady at its next meeting on 7 May. Martin Marietta's chief executive Howard Nye echoed the same uncertainty around macroeconomic conditions and affordability constraints limiting residential construction growth. Hill and Nye also shared similar remarks on tariffs, and both noted the potential for increased costs but minimal impact on earnings. Both companies also pointed to data centers as a bright spot on the private demand side with warehouse construction stabilizing following years of declines. Sentiment around public demand was more positive with both Martin Marietta and Vulcan Materials expecting continued growth in public construction activities at the federal and state level. Hill mentioned more than half of Infrastructure Investment and Jobs Act (IIJA) highway funds are still yet to be spent. Nye said IIJA contributions will peak next year and expected the potential reauthorization of federal surface transportation programs to focus on roads, bridges and ports. Nye also said the push for a new $200/yr fee on electric vehicles was a "really good start" for tackling issues surrounding the Highway Trust Fund. Asphalt revenue jumps Martin Marietta's asphalt and paving revenue grew by 37pc to $80mn in the first quarter of 2025 compared to the same quarter last year with shipments up 26pc over the same period. The boost was supported by higher volumes in California, according to the company's earnings report. Some market participants in California noted demand for liquid asphalt was slightly above forecasts in January with the National Oceanic and Atmospheric Administration reporting below-average precipitation levels for the month. Martin Marietta's aggregates shipments also increased by roughly 7pc in the first quarter. Vulcan's asphalt revenue rose by about 12pc to roughly $209mn in the first quarter of 2025 compared with the same quarter last year. Shipments were also up by 4pc over the same period. Hill noted savings on liquid asphalt reached around $3mn. Wholesale prices on the Gulf coast averaged about $397/st over the first quarter, 2pc below values from the same time in 2024. Aggregates shipments slipped by nearly 1pc in the first quarter of 2025 compared to the same period last year. Vulcan noted frigid temperatures hampered volumes in the quarter as acquisitions made last year helped offset some negative effects from adverse weather. Overall, Martin Marietta reported a gross profit of $335mn on revenue of $1.35bn in the first quarter. This is compared with a profit of $272mn on revenue of $1.25bn in the same quarter last year. Vulcan reported a gross profit of $365mn in the first quarter on revenue of about $1.64bn. This is up from a gross profit of $305mn in the first quarter of 2024 on revenue of roughly $1.55bn. By Cobin Eggers Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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