ILMA Compoundings - March 2021 - 12

INDUSTRY RUNDOWN

Market Report
Firm Fundamentals Boost U.S. Base Oils
Prices Through First Half of 2021
Guo Harn Hong
Firm supply and demand fundamentals will continue to
boost U.S. base oil prices. These firm fundamentals are
set to extend their support for prices until well into the
second quarter of 2021.
A revival of seasonal demand typically supports prices in
the first half of each year. That trend was disrupted in 2020
following the outbreak of the COVID-19 pandemic from
the beginning of that year. Prices fell in the first half of 2020
then rebounded sharply in the second half of the year. The
size of the price increases in the second half of 2020 were
some of the largest on record for any six-month period. That
streak of rising prices is set to continue in the months ahead.
A seasonal rise in demand for finished lubricants will
likely extend their support to the lubricant feedstock. Prices
for finished lubricants were raised in response to rising costs
and firm fundamentals. Additive manufacturers have also
announced price increases.
Demand is expected to hold firm in Latin America, a
major outlet for U.S. base oil producers. Blenders in that
region continue to seek to import supplies from other

ARGUS DOMESTIC SPOT US GROUP II N100 & N600
MINUS EXPORT PRICES ($/USG)
.35
.30
.25
.20
.15
.10
.05
.00
-.05
-.10
-.15

Jan
2016

Jul
2016

Jan
2017

Jul
2017

Group II N100 dom minus exp

12

MARCH 2021

Jan
2018

Jul
2018

Jan
2019

Jul
2019

Group II N600 dom minus exp

| COMPOUNDINGS | ILMA.ORG

Jan
2020

Jul
2020

Jan
2021

markets in response to lower regional production. Overseas demand is also strong in other outlets like Africa, the
Mideast Gulf and Southeast Asia.
PLANNED, UNPLANNED SHUTDOWNS TO KEEP
SUPPLY TIGHT
At the same time, supply availability in the U.S. remains
tight. Supply got even tighter after a winter storm pummelled the Midwest and southern U.S. in mid-February,
shutting and curbing base oils production at several key
refineries in the region.
The freezing temperatures and icy conditions also
disrupted land and water logistics throughout the Midwest
and southern U.S. The unplanned and extended shutdowns
prompted Motiva and ExxonMobil to declare force majeure
on the base oils produced at their respective refineries in
Port Arthur and Baytown, Texas, from February 19.
Weak fuels demand and unusually low fuel margins
throughout 2020 and in early 2021 prompted refiners to
cut run rates and keep inventories at more manageable
levels. But the move has also reduced the feedstock available
for base oils production. Base oils output has fallen even as
demand held steady relative to fuels demand and margins
surged to multiyear highs.
Several producers in the region have reported that they
are unlikely to have surplus spot supplies in 2021. Spot
availability of Group I supplies is expected to be limited
amid planned maintenance work in the first half of the year.
The move will likely continue to keep supplies balanced to
tight over the coming months.
FEEDSTOCKS PRICE RECOVERY SUPPORTS BASE
OILS PRICES
Base oil values are also supported by a sustained rise in
feedstock and crude prices since November. Light Louisiana
sweet crude prices rose by over 12% in January from the
previous month to around $55/bl. Prices are now at their
highest since early 2020.


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ILMA Compoundings - March 2021

Table of Contents for the Digital Edition of ILMA Compoundings - March 2021

ILMA Compoundings - March 2021 - Cover1
ILMA Compoundings - March 2021 - Cover2
ILMA Compoundings - March 2021 - 1
ILMA Compoundings - March 2021 - 2
ILMA Compoundings - March 2021 - 3
ILMA Compoundings - March 2021 - 4
ILMA Compoundings - March 2021 - 5
ILMA Compoundings - March 2021 - 6
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ILMA Compoundings - March 2021 - 12
ILMA Compoundings - March 2021 - 13
ILMA Compoundings - March 2021 - 14
ILMA Compoundings - March 2021 - D1
ILMA Compoundings - March 2021 - D2
ILMA Compoundings - March 2021 - D3
ILMA Compoundings - March 2021 - D4
ILMA Compoundings - March 2021 - D5
ILMA Compoundings - March 2021 - D6
ILMA Compoundings - March 2021 - D7
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ILMA Compoundings - March 2021 - D9
ILMA Compoundings - March 2021 - D10
ILMA Compoundings - March 2021 - D11
ILMA Compoundings - March 2021 - D12
ILMA Compoundings - March 2021 - D13
ILMA Compoundings - March 2021 - D14
ILMA Compoundings - March 2021 - D15
ILMA Compoundings - March 2021 - D16
ILMA Compoundings - March 2021 - D17
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