Changing Landscape in Base Oil Market

The next five years will see big changes in the availability of base oils. In total, there will be over 12 million tonnes per year of new capacity addition of Group II and Group III plants and the concern is whether base oil demand will keep pace with the supply growth. It is anticipated that this would lead to more closures of Group I plants and demand substitution which would require the large scale base oil buyers to restructure their procurement plans and supply chain in order to optimize spend. This article discusses about the changing landscape of base oil market due to drivers like government regulations (GF-6 and PC-11), consumer demand, refinery economics, base oil supply and� �future capacity additions. It is expected that the evolving supply-demand balance will affect relative prices of different categories of base oils due to their availability. This would open an opportunistic window for earning premiums on heavy neutrals, bright stock and wax products whose supply would be tight owing to low yield from Group II base oil plants.   Author: Krutika Parmar