ILMA Compoundings - October 2020 - 21

Argus US domestic spot Group II N600 & Motiva Group II N600 posting ($/USG)

Argus US domestic Group III 4cst minus Group II N100 ($/USG)
$3.50

$1.30

Argus dom spot group II N600

$1.20

Motiva N600

$3.00

$1.10
$1.00

$2.50

$.90
$.80

$2.00

$.70
$.60

$1.50

$.50
$.40
Jan
2016

Jul
2016

Jan
2017

Jul
2017

Jan
2018

Jul
2018

Jan
2019

Jul
2019

Jan
2020

Jul
2020

BASE OILS PRICES FACE PRESSURE FROM
OVERSUPPLY
For now, the risk remains more one of pressure from too
much supply. Since 2019, more than 5 million tons/year of
new premium-grade production has been added to global
base oil production capacity. More premium-grade production will be added over the coming year. The price impact
from the structural change in supply will continue to be
reflected in 2021, as the completion of test runs and rising
familiarity with the new products spur more buying interest.
Rising supply is likely to limit the price impact of firmer
premium-grade demand caused by stricter regulations. U.S.
domestic Group II price-strength ratios are forecast to edge
up through August 2021. U.S. domestic Group I base oils are
mostly forecast to be above their historical average. The pricestrength ratios for SN 150 and bright stock are forecast to be
higher than their historical average since 2010.
The relative strength of Group I partly reflects their more
balanced supply. A drop in base oil production in other
regions, such as Latin America, is also mostly affecting
Group I base oils.

$1.00
Sep
2019

Oct
2019

Nov
2019

Dec
2019

Jan
Feb Mar Apr May Jun
Jul
Aug Sep
2020 2020 2020 2020 2020 2020 2020 2020 2020

Supplies of bright stock were already limited before the
pickup in demand in recent months. Limited Group I
availability in other regions like Europe also diverted overseas
buyers towards Group I supplies in the U.S. These factors
have also provided support to domestic Group I prices.
While U.S. Group II base oil prices are projected to weaken
relative to crude values over the next 12 months, the pressure
on domestic Group III prices is expected to be even larger.
U.S. domestic Group III 4cst prices are currently unusually
high relative to Group II and relative to crude and diesel
prices. The premium of Group III 4cst base oils over domestic
Group II N100 prices is at its highest since late 2016. The
price strength reflected a firm recovery in demand for Group
III base oils since June, as well as tight supply availability.
These are almost entirely imported from overseas markets.
The reliance on overseas shipments creates a time-lag before
supply can respond to a pickup in demand.
Hong is senior analyst of Argus Base Oils Outlook.
He may be reached at +65-6496-9811 or
guoharn.hong@argusmedia.com.

21



ILMA Compoundings - October 2020

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

ILMA Compoundings - October 2020 - Cover1
ILMA Compoundings - October 2020 - Cover2
ILMA Compoundings - October 2020 - 1
ILMA Compoundings - October 2020 - 2
ILMA Compoundings - October 2020 - 3
ILMA Compoundings - October 2020 - 4
ILMA Compoundings - October 2020 - 5
ILMA Compoundings - October 2020 - 6
ILMA Compoundings - October 2020 - 7
ILMA Compoundings - October 2020 - 8
ILMA Compoundings - October 2020 - 9
ILMA Compoundings - October 2020 - 10
ILMA Compoundings - October 2020 - 11
ILMA Compoundings - October 2020 - 12
ILMA Compoundings - October 2020 - 13
ILMA Compoundings - October 2020 - 14
ILMA Compoundings - October 2020 - 15
ILMA Compoundings - October 2020 - 16
ILMA Compoundings - October 2020 - 17
ILMA Compoundings - October 2020 - 18
ILMA Compoundings - October 2020 - 19
ILMA Compoundings - October 2020 - 20
ILMA Compoundings - October 2020 - 21
ILMA Compoundings - October 2020 - 22
ILMA Compoundings - October 2020 - 23
ILMA Compoundings - October 2020 - 24
ILMA Compoundings - October 2020 - 25
ILMA Compoundings - October 2020 - 26
ILMA Compoundings - October 2020 - 27
ILMA Compoundings - October 2020 - 28
ILMA Compoundings - October 2020 - 29
ILMA Compoundings - October 2020 - 30
ILMA Compoundings - October 2020 - 31
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ILMA Compoundings - October 2020 - 33
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