ILMA Compoundings - June 2020 - 17

U.S. Low-Sulphur VGO Prices
2.50

2.00

$/gallon

1.50

1.00

0.50

Data also showed a drawdown of U.S. crude stockpiles for
the first time since January. The main Cushing delivery
hub in the U.S. was quickly approaching working storage
capacity of 76 million barrels, but stocks at Cushing fell to
62.4 million barrels as of May 8.
POSTINGS FALL RAPIDLY IN
VOLATILE MARCH
Crude's complete collapse spurred one of the steepest U.S.
base oil posted-price decreases in ICIS price data history.
In late March, U.S. producers issued separate posted-price
declines ranging from 40 cents to 60 cents per gallon.
These declines followed drops of 30-40 cents per gallon in
early March, bringing total posted-price declines to 70 cents
to $1 per gallon for the month. Such steep declines were last
seen in the wake of the 2008 financial crisis, according to
ICIS data.
Domestic market spreads and export prices responded to
posting declines and sharply lower demand, particularly in
passenger car motor oil (PCMO) end uses. ICIS Group II
N200 prices eroded by 38% by mid-May. Group II N200
export prices fell by 48%. Price pressure appeared set to
persist as base oil price movement tends to lag crude, with
the looming question being, "When will demand return?"
CRIPPLED DEMAND UNDERPINS WEAKNESS
Since the onset of COVID-19 measures, markets players
questioned whether any price level could stimulate demand.
Demand deteriorated rapidly from mid-March onward as
cities and states across the U.S. implemented stay-at-home
orders to help combat the spread of the virus. The orders kept
people isolated in their homes for work and school, limiting
driving and spurring waves of manufacturing plant closures.
The measures most severely affected the PCMO sector
and demand for Group II and III base oil. Group I demand
also declined on marine and industrial activity slowing, but
not to the same extent.
Any business that was deemed nonessential shuttered
temporarily, sidelining demand from OEMs for factory fills
and from quick-lube businesses.
The big three U.S. automakers - Ford, General Motors
and Fiat Chrysler - and others shut their lines in late
March to protect workers' health. A rash of tire-maker
closures followed, curbing demand for process oils.

0.00
Apr 16, 2019

June 25, 2019

Sept 3, 2019

Nov 12, 2019

Jan 28, 2020

Source: ICIS

Export markets were nearly dead, with few deals being
done as COVID-19 spread to all regions. U.S. producers,
which have managed oversupply through exports, had
limited outlets. Demand for U.S. material for use as a fuel
extender in Mexico stalled. India's lockdown essentially
cut off that market. Trade was complicated because of port
restrictions and potential infection of crew members.
Demand uptick was noted in early May, as states
reopened and manufacturing began to resume. Economic
impacts were expected to last for some months, however.
The global decline in GDP has been unprecedented, and
record unemployment dented consumer confidence. Consumers reined in spending to necessities only. The drastic
drop in miles driven pushed out maintenance intervals.
NAPHTHENICS LESS AFFECTED
While tighter supply initially offset price pressure in U.S.
naphthenic oil markets, supply lengthened following the
restart of Ergon's 22,000 bbl/day refinery in Vicksburg,
Mississippi.
The refinery - which was down for a turnaround in
March that was extended for several weeks because of
the virus - is a key supplier in U.S. and export markets.
Viscosities under 500 were snug during the outage, while
viscosities above 500 were more balanced.
Supply began to balance for most grades other than pale
60, which is a major component in transformer oil.
A round of separately announced pale oil price decreases
ranging from 20 cents/gal to 35 cents/gal, with late April
effective dates, followed the restart. Support stemmed from
weak crude prices as well as sidelined demand.
ICIS pale oil market prices have responded in tandem
with the announced decreases and fell about 15%-20%
from pre-virus levels.
Hay is senior editor manager at ICIS.
She may be reached at amanda.hay@icis.com.

17

Apr 7, 2020



ILMA Compoundings - June 2020

Table of Contents for the Digital Edition of ILMA Compoundings - June 2020

ILMA Compoundings - June 2020 - Cover1
ILMA Compoundings - June 2020 - Cover2
ILMA Compoundings - June 2020 - 1
ILMA Compoundings - June 2020 - 2
ILMA Compoundings - June 2020 - 3
ILMA Compoundings - June 2020 - 4
ILMA Compoundings - June 2020 - 5
ILMA Compoundings - June 2020 - 6
ILMA Compoundings - June 2020 - 7
ILMA Compoundings - June 2020 - 8
ILMA Compoundings - June 2020 - 9
ILMA Compoundings - June 2020 - 10
ILMA Compoundings - June 2020 - 11
ILMA Compoundings - June 2020 - 12
ILMA Compoundings - June 2020 - 13
ILMA Compoundings - June 2020 - 14
ILMA Compoundings - June 2020 - 15
ILMA Compoundings - June 2020 - 16
ILMA Compoundings - June 2020 - 17
ILMA Compoundings - June 2020 - 18
ILMA Compoundings - June 2020 - 19
ILMA Compoundings - June 2020 - 20
ILMA Compoundings - June 2020 - 21
ILMA Compoundings - June 2020 - 22
ILMA Compoundings - June 2020 - 23
ILMA Compoundings - June 2020 - 24
ILMA Compoundings - June 2020 - 25
ILMA Compoundings - June 2020 - 26
ILMA Compoundings - June 2020 - 27
ILMA Compoundings - June 2020 - 28
ILMA Compoundings - June 2020 - 29
ILMA Compoundings - June 2020 - 30
ILMA Compoundings - June 2020 - 31
ILMA Compoundings - June 2020 - 32
ILMA Compoundings - June 2020 - 33
ILMA Compoundings - June 2020 - 34
ILMA Compoundings - June 2020 - 35
ILMA Compoundings - June 2020 - 36
ILMA Compoundings - June 2020 - 37
ILMA Compoundings - June 2020 - 38
ILMA Compoundings - June 2020 - 39
ILMA Compoundings - June 2020 - 40
ILMA Compoundings - June 2020 - Cover3
ILMA Compoundings - June 2020 - Cover4
https://www.nxtbook.com/ygsreprints/ILMA/G127535ILMA_vol71_no7
https://www.nxtbook.com/ygsreprints/ILMA/G126213ILMA_vol71_no6
https://www.nxtbook.com/ygsreprints/ILMA/G125546_ILMA_vol71_no5
https://www.nxtbook.com/ygsreprints/ILMA/G124996_ILMA_vol71_no4
https://www.nxtbook.com/ygsreprints/ILMA/G123886_ILMA_vol71_no3
https://www.nxtbook.com/ygsreprints/ILMA/G123315_ILMA_vol71_no2
https://www.nxtbook.com/ygsreprints/ILMA/G122980_ILMA_vol71_no1
https://www.nxtbook.com/ygsreprints/ILMA/G121540_ILMA_vol70_no11
https://www.nxtbook.com/ygsreprints/ILMA/G120882_ILMA_vol70_no10
https://www.nxtbook.com/ygsreprints/ILMA/G120035_ILMA_vol70_no9
https://www.nxtbook.com/ygsreprints/ILMA/G121XXX_ILMA_vol70_no8
https://www.nxtbook.com/ygsreprints/ILMA/G120XXX_ILMA_vol70_no7
https://www.nxtbook.com/ygsreprints/ILMA/G119XXX_ILMA_vol70_no6
https://www.nxtbook.com/ygsreprints/ILMA/G118112_ILMA_vol70_no5
https://www.nxtbook.com/ygsreprints/ILMA/G117382_ILMA_vol70_no4
https://www.nxtbook.com/ygsreprints/ILMA/G116888_ILMA_vol70_no3
https://www.nxtbook.com/ygsreprints/ILMA/G115555_ILMA_vol70_no2
https://www.nxtbook.com/ygsreprints/ILMA/G114774_ILMA_vol70_no1
https://www.nxtbook.com/ygsreprints/ILMA/g110500_ILMA_vol69_no12
https://www.nxtbook.com/ygsreprints/ILMA/g110500_ILMA_vol69_no11
https://www.nxtbook.com/ygsreprints/ILMA/g110500_ILMA_vol69_no10
https://www.nxtbook.com/ygsreprints/ILMA/g109884_ILMA_vol69_no9
https://www.nxtbook.com/ygsreprints/ILMA/g109284_ILMA_vol69_no8
https://www.nxtbook.com/ygsreprints/ILMA/g108494_ILMA_vol69_no7
https://www.nxtbook.com/ygsreprints/ILMA/g107507_ILMA_vol69_no6
https://www.nxtbook.com/ygsreprints/ILMA/g106483_ILMA_vol69_no5
https://www.nxtbook.com/ygsreprints/ILMA/g105803_ILMA_vol69_no4
https://www.nxtbook.com/ygsreprints/ILMA/g104743_ILMA_vol69_no3
https://www.nxtbook.com/ygsreprints/ILMA/g103647_ILMA_vol69_no2
https://www.nxtbook.com/ygsreprints/ILMA/g102869_ILMA_vol69_no1
https://www.nxtbook.com/ygsreprints/ILMA/g101930_ILMA_vol68_no12
https://www.nxtbook.com/ygsreprints/ILMA/g100836_ILMA_vol68_no11
https://www.nxtbook.com/ygsreprints/ILMA/g99200_ILMA_vol68_no10
https://www.nxtbook.com/ygsreprints/ILMA/g98468_ILMA_vol68_no9
https://www.nxtbook.com/ygsreprints/ILMA/g97711_ILMA_vol68_no8
https://www.nxtbook.com/ygsreprints/ILMA/G96767ILMA_vol68_no7
https://www.nxtbook.com/ygsreprints/ILMA/G95397ILMA_vol65_no6
https://www.nxtbook.com/ygsreprints/ILMA/G94323ILMA_vol68_no5
https://www.nxtbook.com/ygsreprints/ILMA/G93127_ILMA_vol69_no4
https://www.nxtbook.com/ygsreprints/ILMA/G91785_ILMA_vol68_no3
https://www.nxtbook.com/ygsreprints/ILMA/G90956_ILMA_vol68_no2
https://www.nxtbook.com/ygsreprints/ILMA/G89146_ILMA_vol68_no1
https://www.nxtbook.com/ygsreprints/ILMA/G87981_ILMA_vol67_no12
https://www.nxtbook.com/ygsreprints/ILMA/G85409_ILMA_vol67_no11
https://www.nxtbook.com/ygsreprints/ILMA/G83595_ILMA_vol67_no10
https://www.nxtbook.com/ygsreprints/ILMA/G81672_ILMA_vol67_no9
https://www.nxtbook.com/ygsreprints/ILMA/G80238_ILMA_vol7_no8
https://www.nxtbook.com/ygsreprints/ILMA/G79388_ILMA_vol7_no7
https://www.nxtbook.com/ygsreprints/ILMA/G78361_ILMA_vol7_no6
https://www.nxtbook.com/ygsreprints/ILMA/G77448_ILMA_vol7_no5
https://www.nxtbook.com/ygsreprints/ILMA/G75899_ILMA_vol67_no4
https://www.nxtbook.com/ygsreprints/ILMA/G75036_ILMA_vol67_no3
https://www.nxtbook.com/ygsreprints/ILMA/G72720_ILMA_vol67_no2
https://www.nxtbook.com/ygsreprints/ILMA/G72220_ILMA_vol67_no1
https://www.nxtbook.com/ygsreprints/ILMA/G70970_ILMA_vol66_no12
https://www.nxtbook.com/ygsreprints/ILMA/G69813_ILMA_vol66_no11
https://www.nxtbook.com/ygsreprints/ILMA/G67522_ILMA_vol66_no10
https://www.nxtbook.com/ygsreprints/ILMA/G66343_ILMA_vol66_no9
https://www.nxtbook.com/ygsreprints/ILMA/G64859_ILMA_vol66_no8
https://www.nxtbookmedia.com