McLaren's Lewis Hamilton has set the pace in final practice at the season-opening Australian Grand Prix.
The Englishman grabbed top spot with a lap right at the end of a session which suggested the battle for pole will be close.
Red Bull's Mark Webber was third fastest. Team-mate Sebastian Vettel spun off and ended up seventh fastest.
Mercedes were fifth and sixth, Nico Rosberg ahead of Michael Schumacher while Fernando Alonso was 16th.
BBC 5 live analyst Jaime Alguersuari, the former Toro Rosso Formula 1 driver, said: "The race pace of Mercedes looked competitive. I don't believe that is Ferrari's true pace - we are going to see some interesting things in qualifying.
"I think McLaren are fast, as we expected. I think Mercedes are faster than we expected and can be at the level of the McLarens. I believe Red Bull have not shown their hand.
"I never expected the Lotus so high up there. That is a good time from Grosjean."
The Franco-Swiss' team-mate Kimi Raikkonen, who is returning to the sport after two years in rallying, was only 12th fastest.
Vettel never got a chance to try the faster 'soft' tyre after losing control while braking for Turn Six and spinning into the gravel with 15 minutes of the session remaining.
But he had just set a time in the first sector of the lap that matched that of the Mercedes, which were the pace-setters at the time having used the 'soft' tyre. That suggests Vettel will be a major contender for pole when qualifying starts at 0600 GMT.
Schumacher also spun into the gravel late in the session, this time at Turn Nine, straight after leaving the pits with a heavy fuel load to do some race-preparation work.
The practice session was the first proper indication of the relative competitiveness of the cars, but a true picture will not emerge until qualifying.
After rain disrupted practice on Friday, the session took place under cloudless blue skies, but it was held against the backdrop of a growing row between the teams about controversial features rivals believe the Mercedes team are using on their car.
There are claims Mercedes have a system that links the DRS overtaking aid - which drivers can use in the race on designated sections of the track if they are within a second of the car in front - to provide further aerodynamic benefits.
There are differing claims about what the Mercedes design feature is, but rivals are convinced that it should not be allowed.
Mercedes team principal Ross Brawn has said he is confident the car complies with the rules.