ILMA Compoundings October 2017 - 22

US DOMESTIC BASE OILS DEMAND VS. EXPORTS ('000 bl/month)
5,250
5,000

US demand

4,750

US exports

4,500
4,250
4,000
3,750
3,500
3,250
3,000
2,750
2,500
2,250
2,000
1,750

Jan-2015

Apr-2015

Jul-2015

Oct-2015

Jan-2016

These monthly shipments began in February after a major
fire at the largest Group I plant in Japan. The plant's heavygrade unit has been down for repairs since then and will
likely remain down through the first quarter of next year. The
monthly shipments of heavy grades from the U.S. Gulf Coast
likely will continue to move to the region until then.
Such Group I heavy grades from the U.S. Gulf Coast
would typically move to Mexico. The drop in such supplies
has added to the shortage of Group I heavy grades in Mexico.
The continuing tightness of Group I supplies in the U.S.
and Mexico has spurred unusual trade flows of Group I
supplies from other regions to the U.S.
A few shipments of bright stock from South America, Europe and northeast Asia have moved to the U.S., and Group
I light and heavy neutrals from Europe and the Baltic region
have moved to the U.S. and Mexico.
GROUP III SUPPLIES REMAIN PLENTIFUL
Group III supplies are likely to continue to increase during
the last three months of the year. Approved and unapproved
Group III supplies have been readily available for most of
the year.
Gas-to-liquids (GTL) shipments to the U.S. from a plant
in the Mideast Gulf resumed in the third quarter. These
shipments had slumped from February to July while the
refinery had unexpected maintenance during the first half of
the year.
A large volume of Group III supplies from another
refinery in the Mideast Gulf moved to the U.S. during this
period and has been able to fill some of the void left by the
lack of GTL base oils. These supplies have secured more
approvals and have subsequently gained more market share.
Another Group III refinery in the Mideast Gulf will
change the marketing and distribution of more than half of

OCTOBER 2017

| COMPOUNDINGS | ILMA.ORG

Apr-2016

Jul-2016

Oct-2016

Jan-2017

Apr-2017

its production from the start of the fourth quarter. These
supplies will no longer carry the same approvals for the
North American market. They will likely begin targeting the
U.S. before the end of the year.
Domestic Group III 4cst and 6cst supplies have also
contributed to the surplus of premium grade base oils. A
couple of U.S. refiners have converted some of their Group
II production to make Group III light- and mid-viscosity
grades. These unapproved domestic supplies have been
offered at discounts compared to existing fully approved
Group III supplies.
LOOKING AHEAD
The U.S. market is poised to finish 2017 and start 2018
with surplus supplies. Any such surplus would contrast with
the relative dearth of such supplies in the second and third
quarters of this year.
But some of the factors that have contributed to the
unusually tight supplies in 2017 are unlikely to repeat themselves in 2018.
Continuing production issues will likely be resolved by
year's end, and repair work will likely be complete by the
first quarter of 2018. Planned maintenance in 2018 is also
expected to be lighter than it was this year. All major Group
II producers had maintenance earlier this year.
Base oil exports are likely to remain high, but increased
Group II and Group III production in the Mideast Gulf and
Russia could limit overseas outlets for the U.S. market.
2017 has been a year of unexpectedly tight supplies. 2018
will likely be different.
Molina is the editor of Argus Americas Base Oils.
She can be reached at 713-360-7560 or
eva.molina@argusmedia.com.

http://www.ILMA.ORG

ILMA Compoundings October 2017

Table of Contents for the Digital Edition of ILMA Compoundings October 2017