INDUSTRY RUNDOWN Market Report U.S. Base Oils Market Firms in Q1 By Eva Molina U.S. base oil prices rose in the first quarter of the year on the back of tightening supplies. Availability of virgin and re-refined supplies tightened, even amid a weaker than usual pickup in seasonal demand in March. A wave of exports and a heavy round of refinery maintenance during the first three months of the year added to the tightness. Domestic and export spot prices gradually increased from January to March. Argus domestic U.S. spot prices for paraffinic light grades rose by 30 to 36 cents per gallon during the period. The tighter supplies and higher spot prices prompted most U.S. base oil producers to raise their posted prices twice in the first quarter. Paraffinic producers increased their postings by a combined 20 to 37 cents per gallon in two moves, one in January and another in March. The increasingly tight supplies allowed base oil prices to continue to rise and to ignore a sustained drop in crude and feedstock values in March." A sustained rise in crude prices from the end of November prompted most producers to raise their term and posted prices in the first half of January. Steady crude prices through mid-March and increasingly limited supplies prompted another round of producer price-increases in early March. The increasingly tight supplies allowed base oil prices to continue to rise and to ignore a sustained drop in crude and feedstock values in March. The steadily rising prices lifted base oils margins in late March to their highest levels in almost two years. The Argus domestic U.S. N100 premium to four-week average vacuum gasoil (VGO) prices rose to 67 cents per gallon, its highest level since April 2015. 16 MAY 2017 | COMPOUNDINGS | ILMA.ORG Most producers finished the quarter with sufficient supplies to cover their term obligations. But they had limited or no spot supplies. EXPORTS CLEAR GROUP II, GROUP I SURPLUS Availability of Group II base oils tightened following a wave of exports from the U.S. Gulf Coast to Asia-Pacific. Group II producers began clearing their surplus supplies in the export market from mid-December. More than 100,000 tons of various U.S. Group II supplies moved to southeast and northeast Asia, India and the Mideast Gulf in the first quarter. Nearly 20,000 tons of Group I light and heavy grades moved from the U.S. Atlantic Coast to India and west Africa. A steady stream of heavy neutrals and bright stock also moved to various outlets in Asia-Pacific and Latin America during the first two months of the year. PLANNED MAINTENANCE CURBS GROUP II OUTPUT A heavy round of planned refinery maintenance in the first quarter helped curb base oils production, tightening supplies further ahead of the peak demand season. A major Group II refinery in the U.S. Gulf Coast began a 45-day planned turnaround from early March. Limited to no spot supplies were available from the facility from mid-February after its excess supplies had been cleared in several shipments to India between December and February. A refinery in the northeastern U.S. that produces Group I base oils and Group II light- and mid-viscosity grades began a three-week turnaround from the end of March. The producer reduced its spot export shipments ahead of and during its shutdown. A couple of major Group II refineries have turnarounds scheduled in April and June. Both of these U.S. Gulf Coast producers had no spot supplies in March ahead of their respective turnarounds. The producers had cleared their excess supplies in shipments to India the previous month. A couple of Group II re-refineries also had weeklong turnarounds in the first quarter that limited their spot supplies.http://www.ILMA.ORG