ILMA Compoundings – January 2019 - 14

INDUSTRY RUNDOWN

Market Report
The Late-2018
Americas Base Oils
Balancing Act
By Judith Taylor
The second half of 2018 has become a balancing act between posted price increases/decreases, up/down crude
oil prices and an approximate $10 per barrel spread
between West Texas Intermediate (WTI) crude and Louisiana Light Sweet (LLS) crude where prices closely track
Europe (Brent) crude oil.
The balancing act toggled into place during late September/October, encouraged and supported by crude oil prices
topping $70 per barrel. Producers increased posted prices
by a fairly common factor of 20 cents per gallon in October, supported by a rise in crude oil prices that seemed a
harbinger of more to come. According to buyers and sellers,
ExxonMobil increased all its posted prices in Groups I, II
and II+, effective Oct. 9. (ExxonMobil does not discuss
its prices because of company protocols.) Most other base
oil producers in Groups I, II and II+ raised posted prices
between early October and the end of the month, with most
viscosity grades affected.
The exception was Motiva; the company did not make
any changes to its posted prices in Group II. Motiva's last
changes in either Group II or Group III were downward
adjustments effective Aug. 6.
Group III posted prices have remained unchanged
throughout the second-half 2018 balancing act, except for
the August reduction by Motiva. Then a dive hit crude oil
prices and pitched fourth-quarter base oils into a precarious
balancing chore between quickly sinking crude oil prices,
growing base oil inventories, challenging export dynamics,
seasonally slowing demand and strong diesel oil prices.
The slide in crude oil prices began about the second half
of October, defining the fourth quarter and fostering the
onset of posted price reductions in November. Crude moved
under $60 per barrel in November. Then, over about a fiveweek period, it regained to the $60s per barrel.

14

JANUARY 2019

| COMPOUNDINGS | ILMA.ORG

Graph 1 on the next page shows these two key crude oil
price trends, the dipping point that touched in August and
the peak to $75 per barrel in October, followed by the dive
in late October and into November.
According to ICIS oil reports, Saudi Arabia triggered
a change in oil market sentiment in mid-November amid
reports that the OPEC member would slash crude supply
by 500,000 barrels per day in December.
Fears of a supply glut provided a headwind to futures
prices, particularly with the demand outlook darkening.
However, Khalid al-Falih, Saudi Arabia's energy minister,
reportedly said that December crude oil nominations would
fall by 500,000 barrels per day versus November because
of seasonally lower demand. He also hinted at an OPEC
production cut, saying the oil cartel agreed that production
needed to be 1 million barrels per day lower than October
levels to avoid oversupply.
Saudi Arabia's output has increased by 650,000 barrels per
day since May. This, along with increases from the United
States and Russia, contributed to Brent losing over $15 per
barrel in just over five weeks. The possibility of less supply
in the coming months has since fed support into the curve,
with both benchmarks edging up on this outlook.
The U.S. Energy Information Administration (EIA)
analysis on crack spreads at mid-November showed that
low distillate inventories are supporting stronger diesel
prices and trending gasoline prices lower. But the crude oil
prognosis at mid-November remains less than clear.
Graph 2 from the EIA on the next page shows crude
oil stocks out to December 2018, with the upward curve
evidence of ample supply.
Crude oil futures from the EIA demonstrate the downward trend on oil price direction expected toward December
alongside a comparison with 2016-17, shown in Graph 3
on the following page.
At mid-November, rumbles filtered into the market
about temporary voluntary allowances (TVAs) of 10
cents per gallon under discussion by one producer. Buyers
confirmed these discussions, and some expected posted price
reductions to emerge at 10 cents per gallon down.
This did not happen as Chevron announced posted reductions, moving all of its Group II posted grade prices down
by 25 cents per gallon effective Nov. 13. Going into the


http://www.ILMA.ORG

ILMA Compoundings – January 2019

Table of Contents for the Digital Edition of ILMA Compoundings – January 2019

Letter From the Ceo
Inside Ilma
What’s Coming Up
Industry Rundown
In the Know
International Insight
Market Report
Business Hub
Counsel Compound
In Network
Member Connections
Portrait
ILMA Compoundings – January 2019 - Cover1
ILMA Compoundings – January 2019 - Cover2
ILMA Compoundings – January 2019 - 1
ILMA Compoundings – January 2019 - 2
ILMA Compoundings – January 2019 - Letter From the Ceo
ILMA Compoundings – January 2019 - Inside Ilma
ILMA Compoundings – January 2019 - 5
ILMA Compoundings – January 2019 - 6
ILMA Compoundings – January 2019 - 7
ILMA Compoundings – January 2019 - What’s Coming Up
ILMA Compoundings – January 2019 - 9
ILMA Compoundings – January 2019 - Industry Rundown
ILMA Compoundings – January 2019 - In the Know
ILMA Compoundings – January 2019 - International Insight
ILMA Compoundings – January 2019 - 13
ILMA Compoundings – January 2019 - Market Report
ILMA Compoundings – January 2019 - 15
ILMA Compoundings – January 2019 - 16
ILMA Compoundings – January 2019 - 17
ILMA Compoundings – January 2019 - 18
ILMA Compoundings – January 2019 - 19
ILMA Compoundings – January 2019 - 20
ILMA Compoundings – January 2019 - 21
ILMA Compoundings – January 2019 - 22
ILMA Compoundings – January 2019 - 23
ILMA Compoundings – January 2019 - 24
ILMA Compoundings – January 2019 - 25
ILMA Compoundings – January 2019 - Business Hub
ILMA Compoundings – January 2019 - 27
ILMA Compoundings – January 2019 - Counsel Compound
ILMA Compoundings – January 2019 - 29
ILMA Compoundings – January 2019 - Member Connections
ILMA Compoundings – January 2019 - 31
ILMA Compoundings – January 2019 - Portrait
ILMA Compoundings – January 2019 - Cover3
ILMA Compoundings – January 2019 - Cover4
https://www.nxtbook.com/ygsreprints/ILMA/G127535ILMA_vol71_no7
https://www.nxtbook.com/ygsreprints/ILMA/G126213ILMA_vol71_no6
https://www.nxtbook.com/ygsreprints/ILMA/G125546_ILMA_vol71_no5
https://www.nxtbook.com/ygsreprints/ILMA/G124996_ILMA_vol71_no4
https://www.nxtbook.com/ygsreprints/ILMA/G123886_ILMA_vol71_no3
https://www.nxtbook.com/ygsreprints/ILMA/G123315_ILMA_vol71_no2
https://www.nxtbook.com/ygsreprints/ILMA/G122980_ILMA_vol71_no1
https://www.nxtbook.com/ygsreprints/ILMA/G121540_ILMA_vol70_no11
https://www.nxtbook.com/ygsreprints/ILMA/G120882_ILMA_vol70_no10
https://www.nxtbook.com/ygsreprints/ILMA/G120035_ILMA_vol70_no9
https://www.nxtbook.com/ygsreprints/ILMA/G121XXX_ILMA_vol70_no8
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