ILMA Compoundings September 2016 - 21

THE ARGUS ANALYSIS U.S. Base Oils Market Balanced Through 2Q on Firm Demand, Increased Exports Eva Molina T he U.S. base oils market remained balanced through early July, at a time of year when supplies can start to build. Instead, firm domestic demand, plant maintenance and a steady flow of exports helped to keep market fundamentals balanced through the second quarter and into the third quarter of the year. The limited surplus supplies supported firm Group II and Group I prices through mid-July. They also slowed the subsequent drop in prices in the second half of July following a seasonal slowdown in demand and a drop in crude prices. Group II, Group I Supplies Remain Limited Group II spot supplies remained limited in the second quarter amid increased fuels output at several U.S. Gulf Coast refineries, plant maintenance at several others and a swath of base oil exports. had no spot supplies for several months leading up to the maintenance. A couple of Group II re-refineries also had routine maintenance in June and July. The turnarounds left them with limited spot supplies ahead of and during the maintenance work. The Group I market has faced a much lighter round of maintenance work. But surplus volumes of both Group I and Group II base oils have been cleared from the U.S. market through a heavy wave of exports to Latin America, Europe and Asia-Pacific. Spot availability of Group I supplies remained relatively balanced as domestic demand for the light grades remained steady. Several Group I producers maintained balanced inventories by clearing their surplus heavy neutrals and Bright Stock supplies in the export market. Increased Exports Keep Market Balanced U.S. base oil exports to key outlets rose well above earlier levels during the first five months of 2016. Export volumes to Mexico increased by 31 percent and to Europe by 47 percent, according to the Energy Information Administration. U.S. producers have steadily increased their shipments of surplus Group I and Group II/II+ supplies to the Mexican market since the third quarter of 2015. Base oils exports to Mexico rose in May to their highest level since August 2012. Most surplus Group I supplies have been cleared into this market and other outlets in Latin America in the second quarter. Several U.S. Gulf Coast refiners increased their motor fuels production ahead of the summer driving season in anticipation of stronger demand and prices. While the market instead faced oversupply and weak motor fuel prices, the move contributed to the Group II light grade supply-tightness. Planned maintenance at several Group II refineries in June and July added to the relative tightness, especially of light grades. A major U.S. Gulf coast refinery had maintenance on a catalyst in the second half of June. The Group II producer already had Besides Latin America, Group I producers also moved in July to clear the lingering supply-overhang of heavy neutrals and Bright Stock through exports to west Africa. A large volume of Group I heavy grades moved to Venezuela and Nigeria in July and August. While Group I exports mainly targeted Latin America, most Group II exports moved to Europe and Asia-Pacific. A major Group II producer with global approvals increased its monthly export volumes to Europe since the start of the year after improved run-rates at its refinery in the U.S. Gulf Coast. Compoundings September 2016 * 21 * Vol. 66 No. 9

Table of Contents for the Digital Edition of ILMA Compoundings September 2016

FROM THE CEO
BOARD BRIEF
NOTES FROM MSCI
THE HEART OF ILMA
THE ARGUS ANALYSIS
VOICES & VIEWS
INTERNATIONAL INSIGHT
SPEAKER SPOTLIGHT
FAMILY BUSINESS
FINANCIAL FREEDOM
RULES & REGS
POWER PLAY
LEGAL EASE
THE WHITE PAPER
ADVERTISERS INDEX
ILMA Compoundings September 2016 - 1
ILMA Compoundings September 2016 - 2
ILMA Compoundings September 2016 - 3
ILMA Compoundings September 2016 - 4
ILMA Compoundings September 2016 - FROM THE CEO
ILMA Compoundings September 2016 - 6
ILMA Compoundings September 2016 - 7
ILMA Compoundings September 2016 - 8
ILMA Compoundings September 2016 - BOARD BRIEF
ILMA Compoundings September 2016 - 10
ILMA Compoundings September 2016 - 11
ILMA Compoundings September 2016 - 12
ILMA Compoundings September 2016 - NOTES FROM MSCI
ILMA Compoundings September 2016 - 14
ILMA Compoundings September 2016 - THE HEART OF ILMA
ILMA Compoundings September 2016 - 16
ILMA Compoundings September 2016 - 17
ILMA Compoundings September 2016 - 18
ILMA Compoundings September 2016 - 19
ILMA Compoundings September 2016 - 20
ILMA Compoundings September 2016 - THE ARGUS ANALYSIS
ILMA Compoundings September 2016 - 22
ILMA Compoundings September 2016 - 23
ILMA Compoundings September 2016 - VOICES & VIEWS
ILMA Compoundings September 2016 - 25
ILMA Compoundings September 2016 - INTERNATIONAL INSIGHT
ILMA Compoundings September 2016 - 27
ILMA Compoundings September 2016 - SPEAKER SPOTLIGHT
ILMA Compoundings September 2016 - 29
ILMA Compoundings September 2016 - FAMILY BUSINESS
ILMA Compoundings September 2016 - 31
ILMA Compoundings September 2016 - FINANCIAL FREEDOM
ILMA Compoundings September 2016 - 33
ILMA Compoundings September 2016 - RULES & REGS
ILMA Compoundings September 2016 - 35
ILMA Compoundings September 2016 - POWER PLAY
ILMA Compoundings September 2016 - 37
ILMA Compoundings September 2016 - LEGAL EASE
ILMA Compoundings September 2016 - 39
ILMA Compoundings September 2016 - THE WHITE PAPER
ILMA Compoundings September 2016 - 41
ILMA Compoundings September 2016 - ADVERTISERS INDEX
ILMA Compoundings September 2016 - 43
ILMA Compoundings September 2016 - 44
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