German Base Oil Market Experiences a Rebound Amid Shift in Production

As per the recent assessment, the Base Oil Market in Germany witnessed a rebound after experiencing weeks of stability owing to the disruption in the production of Base Oil as the refiners have started to shift their manufacturing units to distillates.

At the start of September, most of the refineries work with 80% of their efficacy to focus more on producing distillates rather than manufacturing raw Base Oil to cater to the higher demand for diesel or petrol. As a ripple effect, the availability of Base Oil in the German market is starting to pact soon. This might create a gap between product supplies within the regional market. Likewise, the decline in the price difference between Base Oils and distillate fuels has led refiners to produce more jet fuel and diesel, using less feedstock for Base Oil production. This could lead to a shortage of Base Oils and higher prices, especially for Group I and II oils. Additionally, enough inventories for the product were unavailable during procurement. Therefore, the prices snugged up by 0.8% for Base Oil Group II H 500 FD Hamburg to settle at 1385 USD/tonne along with 1125 USD/tonne Base Oil I SN 500 FD Hamburg, Germany, in the last week of August.

Moreover, the rise in demand for Base Oil has been encountered for the last few days amid the return of market players in the businesses after employing the holiday season in August within Europe. Therefore, the muted trading activity for Base Oil and other downstream lubricant products started to ramp up during this timeframe. The buying activities for all Grades of Base Oil have surged in Germany and the Mediterranean countries, including France. Exports of Group I Base Oils from Europe have not yet resumed, and due to the tight supply situation, producers are not motivated to divert large quantities of products that can be sold to customers closer to home. The recent price hikes in Europe have made selling Group I Base stocks within Europe more profitable than exporting them. As a result, the few large shipments that are being moved to South Africa and Singapore are not for sale but are being moved between affiliated companies to rebalance sales hubs. If these shipments were to be exported, the prices would be closer to the inter-regional levels, which are lower than the current prices in Europe.

As per ChemAnalyst, the German Base Oil market will grow steadily during September amid a rise in feedstock crude oil values along with the shift in production, which might surge the prices further.