Prices for European Group III base oils are under pressure despite Russia's absence from the market, with spot values on a downward trend recently amid increased supply and limited buying appetite.
At the outbreak of the war in Ukraine in February last year, Group III prices rose to historic highs, as sanctions on shipments from Russia hampered supply, compounded by a heavy round of global maintenance. But as global supply recovered and regional demand weakened, arbitrage opportunities arose.
European Group III base oils now hold a $500/t premium over Asian and Mideastern supplies. The Argus-assessed European Group III 4cst spot price is at $2,052.50/t fca ARA, compared with $1,510/t fob Asia and $1,470/t ex-tank UAE for the same grade.
Increased arbitrage shipments from Asia Pacific and the Mideast Gulf are flooding the European spot market and weighing on prices. These volumes are more than offsetting the drop in imports of Russia's Tatneft Group III 4cst to Europe.
Muted demand for finished lubricants, especially from the automotive industry, is also weighing on Group III base oil prices. Market participants estimate that demand for base oils and finished lubricants in Europe is now at a three-year low, with sales dropping to the lowest levels in a decade in April and May. Lube demand has been hit by a decline in passenger car sales, especially in western Europe, which have yet to recover to pre-Covid levels.
