ILMA Compoundings February 2018 - 14

INDUSTRY RUNDOWN

Market Report
Americas Base Oils:
Ending 2017 and
Racing into 2018
By Judith Taylor
The Americas base oil market barely caught a break
starting from late August 2017, when a series of devastating rain-laden hurricanes smashed onto the U.S. Gulf
Coast. While recovery began immediately and improvements came during September, inventory levels were
low at most base oil refineries, and several remained on
allocation deep into the fourth quarter.
From late September into October and early November,
most base oil producers raised posted prices. Flint Hills
Resources (FHR) raised its very light and light Group II
viscosities by 11 cents per gallon and its mid-viscosity
and 600 grades by 14 cents per gallon in late September.
Chevron raised its Group II 100/120, 200/220 and 600
viscosities by 12 cents per gallon effective Oct. 4, with other
Group II and Group I producers raising posted prices in
October and into early November.
Tight supply conditions dominated the fourth quarter,
clamping spot business and stalling spot export options
because deep-sea cargo volumes were challenging to source.
Contracted Group II base oils continued to move as producers' commendable efforts succeeded in keeping a steady flow
of oils to key import regions.
Group III posted prices were steady across the rain-soaked
quarter, as the net-import position of these base stocks
puts the inventory side into a different situation. However,
Group III, along with other base oil producers and distributors, had to deal with the logistic snarls that cramped
business throughout the quarter.
Effective Oct. 10, PetroCanada verified it would participate in Group II, II+ and III posted prices. PetroCanada's
entry into posted prices and broader footprint in all base oil
grades marked what appears to be a shift in the base oil market to bring Group III production into the North American
sphere. In a game-changer announcement at the 13th ICIS
Pan American conference in New Jersey early in December,
Group II base oil producer Motiva stated that it is commer-

FEBRUARY 2018

| COMPOUNDINGS | ILMA.ORG

cially producing Group III base oils and would soon enter
posted prices on these oils.
The moves by PetroCanada and Motiva immediately
change the net-import dynamics for Group III base oils in
the U.S. market going into 2018. These changes are making
the first quarter of 2018 a race into new base oil buying and
selling options for Group III.
On the cusp of the race into 2018 and the ending of short
supply-dominated 2017, the 13th ICIS Pan American base
oil conference highlighted some of the concerns of the lubricant industry. A key area getting closer attention in 2018
is base stock interchange. There is a growing industry focus
on the increasing complexity of engine oil formulations to
meet the needs of evolving engine designs, particularly with
low-viscosity base oils, according to Richard Dougherty of
ExxonMobil, a speaker at the conference.
Dougherty outlined industry needs, such as liability on
engine warranties and ensuring consistency in quality oils that
can routinely meet industry standards. "ExxonMobil views
base stock interchange as beneficial and needed," he said.
Flexibility within a given slate of base stocks is a necessary
element of the task, with final responsibility for the outcome
to lie with the oil marketer, he said. Guidelines are needed for
the base stock interchange, with the industry facing new tests
to certify base stocks for upcoming GF-6 approvals.
While the ultimate definition of a base stock slate is up to
the base oil manufacturer, quality, specification and branding form the core of the slate and are defined by the owner
and/or manufacturer of the oils. "Technical judgement is
needed but must be supported by the data and science,"
Dougherty said.
ILMA CEO HOLLY ALFANO SPEAKS AT THE ICIS PAN
AMERICAN CONFERENCE
ILMA CEO Holly Alfano said the Association had conducted a survey of its more than 350 members and found the
following issues to be the top concerns for 2017: tax reform;
the Affordable Care Act (ACA); the Environmental Protection Agency (EPA); and trade agreements.
On tax reform, Alfano pointed out that ILMA members
include most base oil producers, many blending and formulating companies, distributors and finished lube buyers
and sellers. A number of these are small businesses that
see tax reform as a necessary element in fostering improved economics. In late December, that necessary element
came to fruition with the signing of the Tax Cuts and Jobs
Act of 2017.

http://www.ILMA.ORG

ILMA Compoundings February 2018

Table of Contents for the Digital Edition of ILMA Compoundings February 2018