ILMA Compoundings August 2017 - 13

ARGUS DOMESTIC US N100 PREMIUM TO 4 WEEK AVERAGE VGO ($/USG)

Chevron's Group II refinery in Pascagoula, Mississippi, that
produces 23,000 barrels per day.
MAINTENANCE A FACTOR IN TIGHT SUPPLIES
The slump in inventories coincided with the start of a heavy
round of plant maintenance from March. The subsequent
drop in production added to the supply-tightness of all Group
II and Group I base oil grades through the second quarter.
All of the major Group II refineries had planned or
unplanned maintenance between March and June, as did a
couple of re-refineries. Some producers needed to place their
term customers on allocation or restrict the volume that could
be received ahead of and during the maintenance.
None of the major Group II producers had spot supplies
available. A couple of refineries that completed their maintenance in May continued to work to fill delayed shipments
and rebuild their inventories through June.
A couple of Group I refineries also had planned maintenance in the second quarter. These turnarounds lasted longer
than expected. Continuing production issues at another major refinery have curbed its bright stock production since late
2016. These longer-than-expected turnarounds and continuing production issues kept Group I supplies especially tight.

Meanwhile, in Yanbu, Saudi Arabia, Luberef is expanding and
upgrading its Group I base oil plant to produce 715,000 tons per
year of Group II.
"For the base oil suppliers, especially the new entrants, they will
have to think very hard about what they can offer to break into
markets or retain their most important customers [blenders],"
said Richard Prince, a lubricant independent consultant based in
the United Kingdom.
Ensuring a flexible global supply chain infrastructure could be
key. For example, since 2014, major base oil producer Chevron
has been increasing its base oil terminal capacity in the Americas,
Europe and Asia so that "customers can buy Chevron-branded
base oils on every continent of the world."
In December, the company added its fifth Group II storage
facility or supply base, this one in Le Havre, France, allowing
blenders to reduce supply chain complexity and time lag. Its other

$0.85
$0.80
$0.75
$0.70
$0.65
$0.60
$0.55
$0.50
$0.45
$0.40
$0.35
$0.30
$0.25
$0.20
$0.15
Jan
2013

Jun
2013

Nov
2013

Apr
2014

Sep
2014

Feb
2015

Jul
2015

Dec
2015

May
2016

Oct
2016

Mar
2017

US GROUP II N600 POSTING VS ARGUS DOMESTIC US N600 ($/USG)
$3.00
$2.95
$2.90
$2.85
$2.80
$2.75
$2.70
$2.65
$2.60
$2.55
$2.50
$2.45
$2.40
Jun
2016

Motiva posting

Jul
2016

Aug
2016

Sep
2016

Oct
2016

Nov
2016

Argus dom spot

Dec
2016

Jan
2017

Feb
2017

Mar
2017

facilities in Europe are in Antwerp, Belgium; Liverpool, England;
Hamburg, Germany; and Istanbul, Turkey.
Experts say the availability of Group II base oil global slates
allows easy accessibility and close proximity to overseas markets,
benefiting blenders using the same formulations in different
countries and easing entry into new markets.
It will also accelerate the rate of Group I substitution globally
and improve the quality of finished lubricants in regions such as
the Middle East and Africa. "I think there will be much emphasis
on seeking out new markets in regions that have had less attention
before, especially Africa," said Prince.
Ching is a journalist and freelance writer based in
Singapore.

Apr
2017

May
2017

ILMA Compoundings August 2017

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