ILMA Compoundings - June 2020 - 17
U.S. Low-Sulphur VGO Prices
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
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
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.
Apr 16, 2019
June 25, 2019
Sept 3, 2019
Nov 12, 2019
Jan 28, 2020
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,
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 email@example.com.
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
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ILMA Compoundings - June 2020 - Cover3
ILMA Compoundings - June 2020 - Cover4