In Europe, all grades of API Group I should be readily available through the first part of next year. This despite the production lost during 2015 and 2016, which many felt would cause shortages and limited availability throughout Europe.

The same cannot be said for supplies from Russia or the United States. However, because the short term availability of Group I should increase, buyers will enjoy more choice, and prices may start to fall during this period. But other factors could affect prices and send them in a totally different direction.

First, OPEC will be deciding whether to curtail production to boost prices toward U.S. $60 per barrel. If successful, this action will surely move Group I prices higher. However, with Saudi Arabia and Iran locking horns on output, many pundits doubt an agreement will be reached. So, there could be further downward pressure on Group I prices.

At the same time, two refineries will be entering turnaround. Lotos in Gdansk and ENI in Livorno have scheduled maintenance for October that could severely curtail their Group I production, even against provisional stocking to cover contract receivers.

Does this mean the market remains flat, or will another factor play a part in Group I pricing? Year-end targets for low inventories by both seller and buyer could diminish demand, heaping more negativity on prices.

The various Group I grades may also show varying attitudes to price. For example, traditional brightstock markets in West Africa are having real problems with finance. Should these barriers eventually lift, there appears to be a great deal of lower priced brightstock available from the U.S that can cover these competitive markets. This means that opportunities to move large quantities of brightstock out of Europe may be compromised, putting downward pressure on prices.

Meanwhile, some production of light solvent neutrals has been shut down, and light viscosity Group II grades are expected to compete with outgoing Group I neutrals on price and usability. The result has been an increased influx of Russian light neutrals into Europe, instead of blenders opting to switch to higher priced Group IIs.

The ultimate effect of all these factors remains unknown, and only time will tell how prices will pan out in this sector. But the balanced view is for prices to drop over the next three to four months and, thereafter, follow the predicted crude cycle upward.

Group II markets are experiencing vastly different pricing drivers. At present, Europe has no significant Group II production and depends on imports from the U.S. and Far East. However, this scenario is about to change with a vengeance.

One million tons of production will potentially begin flowing from ExxonMobil in Rotterdam in late 2017 or early 2018. Another 715,000 tons are due from Saudi Arabias Luberef in 2018.

Although the Middle East production is not thought to be targeted for Europe, there will inevitably be some crossover into Mediterranean markets. Adding this new supply to established large imports from Chevron, S-Oil and SK Lubricants will give the European market a different look.

At the moment, Group II import activity has been heightened, with suppliers in the Far East and U.S. moving material into the market. Eventually, European domestic production will take over this supply.

Europes Group II market will certainly expand but not fast enough to consume both the new production and existing imports. So, there could be some heavy competition in this sector of the market. These factors alone could be the driving forces affecting transitional or eventual Group II prices. In the future, Group II, particularly lighter viscosity grades, could fall below comparative Group I numbers.

Analysts have long been aware that Group III production would become untenable, with supply exceeding demand for a considerable period before the market reaches equilibrium. European production is sustainable, but large production increases are expected from Middle East, Russian and Far East suppliers. All these producers have identified Europe as a potential marketplace, despite its finite limits on demand.

Thus, prices are expected to be under pressure for some time, with almost constant erosion, and this market could turn messy. Even now, some producers are looking to cut production or even mothball some sites until the market can sustain the production.

A few planned refineries have been cancelled or delayed, at the same time that other units are opening and flooding the global market. Next year will see competition as never before, accompanied by some other twists to Group III markets in terms of production and marketing.

All is not doom and gloom; forecasts see demand for all base oils climbing next year, with positive growth continuing through 2025. But incremental growth will be small and certainly insufficient to account for anticipated production increases. More plants will close, but the growing imbalance in all base oil sectors shows little sign of improving.