ILMA Compoundings August 2017 - 12

INDUSTRY RUNDOWN

Market Report
US Base Oils Market Tight Through Q2
By Eva Molina
The U.S. base oils market faced unexpectedly tight
supplies in the second quarter of the year after a
record-high volume of exports in the first quarter and
a heavy round of plant maintenance.
A seasonal pickup in demand ahead of the spring oilchange season further exacerbated the supply tightness for
Group I and Group II base oils. The exception was Group III
base oils, whose supplies rose.
Most of the major Group I and Group II producers had
limited to no additional supplies available in the second
quarter. The supply tightness spurred U.S. base oils producers
to raise their posted prices in March and again in April, even
as crude prices fell.
The higher prices lifted base oils' margins to a four-year
high in late May. The Argus domestic U.S. Group II N100
premium to the four-week average vacuum gas oil (VGO)
price rose to $0.78 per gallon in late May. This was the highest level since May 2013.

the Energy Information Administration (EIA). This was up
from 6.39 million barrels during the same period last year.
Total base oils and lube exports rose to 3.68 million barrels
in March, the second-highest ever. The highest volume was in
January, while the third-highest came in February.
The spike in export shipments reflected an open arbitrage
to markets including Asia-Pacific, which faced an unusually
heavy round of planned and unplanned plant maintenance in
the first half of the year. Group II shipments to Europe also
surged in March ahead of the start of plant maintenance in
the U.S. Gulf Coast.
The surge in exports depleted U.S. producers' stocks; base
oil inventories fell in March to their lowest level in nearly
three years.
U.S. base oils and lube stocks fell to 9.96 million barrels
in March. The volume was down sharply from 11.47 million
barrels the previous month. March's total was the lowest
since June 2014, which was the month before the startup of

EXPORTS SURGE IN Q1
U.S. base oils exports surged to a record-high 10.56 million
barrels in the first three months of the year, according to

Global View
Though U.S. supplies remain tight, there are some
areas of the world experiencing oversupply, leading
to opportunities for development of storage facilities.

By Lam Lye Ching
In 2016, global demand for base oil was about 36 million tons
and output was 54 million tons. However, as economic growth
continues in Asia, an increase in demand for automotive and
industrial lubricants there will absorb some of the new Group II
supply. According to multinational oil and gas company Total,
by 2020, almost half of global lubricant demand will come from
Asia-Pacific countries.

12

AUGUST 2017

| COMPOUNDINGS | ILMA.ORG

Apart from new Group II capacities coming from China and
Indonesia, ExxonMobil is also expanding its Singapore refinery. It
is expected to begin producing the company's EHC Group II base
stock in 2019.
The company also expects Europe's current demand for Group
II to exceed supply. For example, Group I demand is already declining in the higher end of the passenger vehicle market in favor
of Group II. To meet demand, its new $1 billion Group II plant in
Rotterdam, Netherlands, is expected to begin operations in 2018.


http://www.ILMA.ORG

Table of Contents for the Digital Edition of ILMA Compoundings August 2017

Letter From the President
Letter From the CEO
Inside ILMA
What's Coming Up
In the Know
Industry Rundown
Market Report
Bridging the Gap from ILSAC GF-5 to GF-6
Who's Next
It's About the Process
Business Hub
Counsel Compound
Washington Landscape
Member Connections
Cross Connections
Portrait
ILMA Compoundings August 2017 - Cover1
ILMA Compoundings August 2017 - Cover2
ILMA Compoundings August 2017 - 1
ILMA Compoundings August 2017 - 2
ILMA Compoundings August 2017 - Letter From the President
ILMA Compoundings August 2017 - 4
ILMA Compoundings August 2017 - Letter From the CEO
ILMA Compoundings August 2017 - Inside ILMA
ILMA Compoundings August 2017 - 7
ILMA Compoundings August 2017 - What's Coming Up
ILMA Compoundings August 2017 - 9
ILMA Compoundings August 2017 - Industry Rundown
ILMA Compoundings August 2017 - 11
ILMA Compoundings August 2017 - Market Report
ILMA Compoundings August 2017 - 13
ILMA Compoundings August 2017 - 14
ILMA Compoundings August 2017 - 15
ILMA Compoundings August 2017 - Bridging the Gap from ILSAC GF-5 to GF-6
ILMA Compoundings August 2017 - 17
ILMA Compoundings August 2017 - 18
ILMA Compoundings August 2017 - 19
ILMA Compoundings August 2017 - 20
ILMA Compoundings August 2017 - 21
ILMA Compoundings August 2017 - Who's Next
ILMA Compoundings August 2017 - 23
ILMA Compoundings August 2017 - 24
ILMA Compoundings August 2017 - 25
ILMA Compoundings August 2017 - 26
ILMA Compoundings August 2017 - 27
ILMA Compoundings August 2017 - It's About the Process
ILMA Compoundings August 2017 - 29
ILMA Compoundings August 2017 - 30
ILMA Compoundings August 2017 - 31
ILMA Compoundings August 2017 - Business Hub
ILMA Compoundings August 2017 - 33
ILMA Compoundings August 2017 - Counsel Compound
ILMA Compoundings August 2017 - 35
ILMA Compoundings August 2017 - Member Connections
ILMA Compoundings August 2017 - 37
ILMA Compoundings August 2017 - Cross Connections
ILMA Compoundings August 2017 - 39
ILMA Compoundings August 2017 - Portrait
ILMA Compoundings August 2017 - Cover3
ILMA Compoundings August 2017 - Cover4
https://www.nxtbook.com/ygsreprints/ILMA/G120XXX_ILMA_vol70_no7
https://www.nxtbook.com/ygsreprints/ILMA/G119XXX_ILMA_vol70_no6
https://www.nxtbook.com/ygsreprints/ILMA/G118112_ILMA_vol70_no5
https://www.nxtbook.com/ygsreprints/ILMA/G117382_ILMA_vol70_no4
https://www.nxtbook.com/ygsreprints/ILMA/G116888_ILMA_vol70_no3
https://www.nxtbook.com/ygsreprints/ILMA/G115555_ILMA_vol70_no2
https://www.nxtbook.com/ygsreprints/ILMA/G114774_ILMA_vol70_no1
https://www.nxtbook.com/ygsreprints/ILMA/g110500_ILMA_vol69_no12
https://www.nxtbook.com/ygsreprints/ILMA/g110500_ILMA_vol69_no11
https://www.nxtbook.com/ygsreprints/ILMA/g110500_ILMA_vol69_no10
https://www.nxtbook.com/ygsreprints/ILMA/g109884_ILMA_vol69_no9
https://www.nxtbook.com/ygsreprints/ILMA/g109284_ILMA_vol69_no8
https://www.nxtbook.com/ygsreprints/ILMA/g108494_ILMA_vol69_no7
https://www.nxtbook.com/ygsreprints/ILMA/g107507_ILMA_vol69_no6
https://www.nxtbook.com/ygsreprints/ILMA/g106483_ILMA_vol69_no5
https://www.nxtbook.com/ygsreprints/ILMA/g105803_ILMA_vol69_no4
https://www.nxtbook.com/ygsreprints/ILMA/g104743_ILMA_vol69_no3
https://www.nxtbook.com/ygsreprints/ILMA/g103647_ILMA_vol69_no2
https://www.nxtbook.com/ygsreprints/ILMA/g102869_ILMA_vol69_no1
https://www.nxtbook.com/ygsreprints/ILMA/g101930_ILMA_vol68_no12
https://www.nxtbook.com/ygsreprints/ILMA/g100836_ILMA_vol68_no11
https://www.nxtbook.com/ygsreprints/ILMA/g99200_ILMA_vol68_no10
https://www.nxtbook.com/ygsreprints/ILMA/g98468_ILMA_vol68_no9
https://www.nxtbook.com/ygsreprints/ILMA/g97711_ILMA_vol68_no8
https://www.nxtbook.com/ygsreprints/ILMA/G96767ILMA_vol68_no7
https://www.nxtbook.com/ygsreprints/ILMA/G95397ILMA_vol65_no6
https://www.nxtbook.com/ygsreprints/ILMA/G94323ILMA_vol68_no5
https://www.nxtbook.com/ygsreprints/ILMA/G93127_ILMA_vol69_no4
https://www.nxtbook.com/ygsreprints/ILMA/G91785_ILMA_vol68_no3
https://www.nxtbook.com/ygsreprints/ILMA/G90956_ILMA_vol68_no2
https://www.nxtbook.com/ygsreprints/ILMA/G89146_ILMA_vol68_no1
https://www.nxtbook.com/ygsreprints/ILMA/G87981_ILMA_vol67_no12
https://www.nxtbook.com/ygsreprints/ILMA/G85409_ILMA_vol67_no11
https://www.nxtbook.com/ygsreprints/ILMA/G83595_ILMA_vol67_no10
https://www.nxtbook.com/ygsreprints/ILMA/G81672_ILMA_vol67_no9
https://www.nxtbook.com/ygsreprints/ILMA/G80238_ILMA_vol7_no8
https://www.nxtbook.com/ygsreprints/ILMA/G79388_ILMA_vol7_no7
https://www.nxtbook.com/ygsreprints/ILMA/G78361_ILMA_vol7_no6
https://www.nxtbook.com/ygsreprints/ILMA/G77448_ILMA_vol7_no5
https://www.nxtbook.com/ygsreprints/ILMA/G75899_ILMA_vol67_no4
https://www.nxtbook.com/ygsreprints/ILMA/G75036_ILMA_vol67_no3
https://www.nxtbook.com/ygsreprints/ILMA/G72720_ILMA_vol67_no2
https://www.nxtbook.com/ygsreprints/ILMA/G72220_ILMA_vol67_no1
https://www.nxtbook.com/ygsreprints/ILMA/G70970_ILMA_vol66_no12
https://www.nxtbook.com/ygsreprints/ILMA/G69813_ILMA_vol66_no11
https://www.nxtbook.com/ygsreprints/ILMA/G67522_ILMA_vol66_no10
https://www.nxtbook.com/ygsreprints/ILMA/G66343_ILMA_vol66_no9
https://www.nxtbook.com/ygsreprints/ILMA/G64859_ILMA_vol66_no8
https://www.nxtbookmedia.com