Page 14 - Fuels & Lubes International 2012 - Q1

FUELS & LUBES I NTERNAT IONAL Qua r t e r One 2012 14
I L LUS TRAT I ON BY CH I L I DOGS
B A S E O I L C O L U M N
ClosetoBottom?
A quarterly in-depth analysis of the global base oil market by www.baseoilmarket.com
SOURCE :WWW. BASEO I LMARKE T. COM
2011 Base oil SN500 prices ($/MT)
FOB Europe FOB Asia FOB Middle East FOB Baltic Jan Feb Mar Apr Jun May Jul Aug Sep Oct Nov
2011 Base oil SN150 prices ($/MT)
FOB Europe FOB Asia FOB Middle East FOB Baltic
2011 Base oil SN500 prices ($/MT)
CFR NE Asia CFR India
2011 Base oil SN150 prices ($/MT)
CFR NE Asia CFR India
CFR NE Asia CFR India
2011 Base oil BS150 prices ($/MT)
FOB Europe FOB Asia FOB Middle East
$1500
$1400
$1300
$1200
$1100
$1000
$900
$1500
$1400
$1300
$1200
$1100
$1000
$900
$1500
$1400
$1300
$1200
$1100
$1000
$900
$1400
$1300
$1200
$1100
$1000
$900
$800
$1700
$1600
$1500
$1400
$1300
$1200
$1100
$1700
$1600
$1500
$1400
$1300
$1200
$1100
2011 Base oil BS150 prices ($/MT)
Jan Feb Mar Apr Jun May Jul Aug Sep Oct Nov
Jan Feb Mar Apr Jun May Jul Aug Sep Oct Nov
Jan Feb Mar Apr Jun May Jul Aug Sep Oct Nov
Jan Feb Mar Apr Jun May Jul Aug Sep Oct Nov
Jan Feb Mar Apr Jun May Jul Aug Sep Oct Nov
IN THE FOURTH QUARTER OF 2011,
macroeconomic factors continued to drive
financial markets and also had a large effect
on base oil markets. At this point, it would
be tough for Europe to avoid a recession.
The question remains, however, whether
the recession will be relatively shallow or
whether the debt crisis will result in the
break-up of the eurozone. The latter will
most likely cause a global recession, hit-
ting the global banking system which will
reduce financing to businesses and con-
sumers. Also, the eurozone is the biggest
market for export-driven countries such as
China, so a global contagion is unavoidable.
The situation in Europe and the U.S.
will decide the economic future for the
world economy in the short-term. On one
hand, if the situation gets out of control,
a global recession will cause most assets,
including base oil prices, to fall further.
However, if governments and supranational
organizations, such as the International
Monetary Fund (IMF), succeed in control-
ling the situation, Europe is likely to be the
only region to enter a recession. We are
nearing the crossroads that will decide the
future path of the global economy.
FromOctober to mid-December, the
base oil market has suffered from large price
falls due to weak global demand and over-
supply. By mid-December, Group I base oil
export prices in Europe and the Baltic have
fallen by US$245-260 per metric ton (MT),
while import prices in China and India have
declined by US$170-280/MT. Group II and
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