Argus Base Oils Base Oil Market Prices, News and Analysis

Argus Base Oils Base oil market prices, news and analysis

Issue 20-6 | Friday 7 February 2020 prices at a glance

Asia-Pacific $/t Europe €/t $/t Low Mid High ± Low Mid High ± Low Mid High ±

Group I Group I SN 150 ex-tank Singapore 610 630.00 650 nc SN 150 fob domestic NWE 660 682.50 705 +5.00 SN 500 ex-tank Singapore 625 645.00 665 nc SN 500 fob domestic NWE 685 705.00 725 +5.00 Bright stock ex-tank Singapore 780 800.00 820 nc Bright stock fob domestic NWE 735 755.00 775 nc SN 150 fob Asia 530 550.00 570 nc SN 150 fob European export 580 600.00 620 +15.00 SN 500 fob Asia 545 565.00 585 +5.00 SN 500 fob European export 600 620.00 640 +10.00 Bright stock fob Asia 660 680.00 700 nc Bright stock fob European export 640 660.00 680 nc Group II Group II N150 ex-tank Singapore 635 655.00 675 nc N100 fca ARA 700 717.50 735 nc 769 788.00 807 -3.50 N500 ex-tank Singapore 695 715.00 735 nc N150 fca ARA 695 712.50 730 nc 763 782.50 802 -3.50 N150 fob Asia 590 610.00 630 nc N220 fca ARA 715 735.00 755 nc 785 807.0 0 829 -4.00 N500 fob Asia 605 625.00 645 nc N600 fca ARA 735 757.50 780 nc 807 832.00 857 -3.50 Northeast Asia $/t Group III Low Mid High ± 4cst fca NWE 705 765.00 825 +5.00 774 840.00 906 +2.00 6cst fca NWE 750 807.50 865 +5.00 824 887.0 0 950 +1.50 Group I 8cst fca NWE 715 775.00 835 +5.00 785 851.00 917 +1.50 SN 150 cfr 580 600.00 620 nc Group III (a) SN 500 cfr 595 615.00 635 nc Bright stock cfr 720 740.00 760 nc 4cst fca NWE 770 805.00 840 nc 846 884.50 923 -3.50 Group II 6cst fca NWE 810 845.00 880 nc 890 928.50 967 -3.50 N150 cfr 610 630.00 650 nc 8cst fca NWE 785 820.00 855 nc 862 900.50 939 -4.00 N500 cfr 625 645.00 665 nc * Group III (a) refers to base oils which have Volkswagen Oil Quality Standard VW India and UAE $/t 504 00/507 00 certification Group III (b) Low Mid High ± 4cst fca NWE 690 715.00 740 +5.00 758 785.50 813 +2.00 Group I 6cst fca NWE 705 730.00 755 +5.00 774 801.50 829 +2.00 SN 150 (LVI) cfr India 570 590.00 610 +10.00 8cst fca NWE 700 725.00 750 +5.00 769 796.50 824 +2.00 SN 500 (LVI) cfr India 575 595.00 615 +10.00 * Group III (b) refers to base oils which do not have Volkswagen Oil Quality Stan- Bright stock cfr India 685 705.00 725 +5.00 dard VW 504 00/507 00 certification SN 150 (LVI) cfr UAE 560 580.00 600 +5.00 SN 500 (LVI) cfr UAE 545 565.00 585 +5.00 Group II US $/t N70 cfr India 650 670.00 690 nc N150 cfr India 630 650.00 670 nc Low Mid High ± N500 cfr India 640 660.00 680 nc Group I Group III SN 150 fob 597 621.00 645 +6.00 4cst ex-tank UAE 690 710.00 730 nc SN 500 fob 617 641.00 665 +6.00 Russia and FSU $/t Bright stock fob 817 840.50 864 +8.00 Low Mid High ± Group II N100 fob 611 635.50 660 +9.50 Group I N220 fob 601 625.50 650 +9.00 SN 150 fob Baltic Sea 485 502.50 520 nc N600 fob 606 630.00 654 +9.00 SN 500 fob Baltic Sea 490 510.00 530 nc Group III (domestic) SN 150 fob Black Sea 445 465.00 485 nc 4cst 832 857.0 0 882 nc SN 500 fob Black Sea 465 485.00 505 nc 6cst 838 863.00 888 nc Overview 8cst 838 863.00 888 nc Naphthenic base oils Global base oil prices are steady to firm. Tighter-than-usual Pale oil 60 fob 661 684.50 708 nc supply supports European and US prices. Asia-Pacific prices Pale oil 100 fob 665 690.00 715 nc Pale oil 500 fob 644 667.0 0 690 nc are steady as moves by Chinese producers to slash produc- Pale oil 2000 fob 642 665.00 688 nc tion rates counter low Chinese lube demand. Sustained demand for very-light grade base oils supports Indian prices.

Argus Market Map

fob Baltic Sea fob European export SN 150 502.50 SN 150 600.00 SN 500 510.00 SN 500 620.00 cfr NE Asia N150 fca ARA 782.50 SN 150 600.00 N600 fca ARA 832.00 fob Black Sea SN 500 615.00 SN 150 465.00 N150 630.00 SN 500 485.00 N500 645.00

cfr UAE (LVI) SN 150 580.00 SN 500 565.00 fob US export cfr India fob Asia SN 150 621.00 SN 150 (LVI) 590.00 SN 150 550.00 SN 500 641.00 SN 500 (LVI) 595.00 SN 500 565.00 N100 635.50 N150 650.00 N150 610.00 N600 630.00 N500 660.00 N500 625.00

Freight rates (US) * $/t Arbitrage opportunities - Group I * $/t Route 1,000t 3,000t 5,000t 10,000t SN 150 SN 500 Destination minus Origin US Gulf coast-Rotterdam 100-110 68-75 60-62 50-58 This Prior This Prior Origin | Destination week week week week US Gulf coast-Brazil 105-110 90 85 75-80 US Gulf coast-Far East 125-130 90-95 85 76-80 Fob Europe export - ex-tank Singapore +30.00 +45.00 +25.00 +35.00 US Gulf coast-India 130-135 100 90 80 Fob Baltic - ex-tank Singapore +127.50 +127.50 +135.00 +135.00 * rates for January 2020, provided by SPI Marine (www.spimarineusa.com) Fob Europe export - cfr UAE (LVI) -20.00 -10.00 -55.00 -50.00 Fob Asia - domestic US +135.00 +125.50 +144.00 +143.00 Freight rates (Asia-Pacific) * $/t Fob Europe export - domestic US +85.00 +90.50 +89.00 +93.00 Route 3,000t 5,000t Fob Black Sea - cfr India (LVI) +125.00 +115.00 +110.00 +100.00 Singapore-WC India 52.50 49.50 Fob Asia - cfr India (LVI) +40.00 +30.00 +30.00 +25.00 Singapore-Indonesia 29.50 26.00 Fob Baltic - domestic US +182.50 +173.00 +199.00 +193.00 Singapore-Thailand 31.00 27.50 Fob Baltic - domestic NWE +180.00 +175.00 +195.00 +190.00 Singapore-central China 44.50 39.50 Fob US export - ex-tank Singapore +9.00 +15.00 +4.00 +10.00 Singapore-Japan 57.0 0 52.00 S.Korea-WC India 63.00 56.00 Arbitrage opportunities - Group II * $/t S.Korea-Singapore 40.00 34.00 N100/N150 N500/N600 S.Korea-Japan 28.00 22.00 Destination minus Origin This Prior This Prior S.Korea-central China 29.00 24.00 Origin | Destination week week week week S.Korea-Taiwan 31.00 26.00 Japan-central China 47.0 0 38.00 Fob Asia - fca ARA +172.50 +176.00 +207.0 0 +210.50 S.Korea-US Gulf coast 93.00 74.00 Fob Asia - domestic US +78.00 +72.00 +77.0 0 +65.00 S.Korea-Europe 122.00 99.00 Fob Asia - cfr India +40.00 +40.00 +35.00 +35.00 Mideast Gulf-WC India 44.00 39.00 Fob US export - FCA ARA +147.0 0 +160.00 +202.00 +214.50 Mideast Gulf-central China 64.00 59.00 Fob US export - cfr India +14.50 +24.00 +30.00 +39.00 * rates based on one port loading/one port discharge Fob US export - ex-tank Singapore +19.50 +29.00 +85.00 +94.00 * rates provided at market close on 30 January by SPI Marine *The price-spread reflects the difference between the fob export (Origin) price (www.spimarineasia.com) and the domestic/cfr (Destination) price

Issue Ref: 421631 Argus Base Oils Issue 20-6 | Friday 7 February 2020

FEEDSTOCK FUNDAMENTALS

Global base oil prices have climbed, compared to feedstock These measures have included run-cuts, more wide- and competing fuel prices that remained close to their low- spread arbitrage shipments, and diversion of base oils into est levels since end-2018. other fuels markets. The domestic European SN 150 base oil price premiums Lower feedstock prices have bolstered base oil values, to 30-day average Ice gasoil futures have dropped to $119/t, compared to crude and diesel, to their highest levels in from $143/t a year earlier. The SN 500 premium has fallen more than a year in some markets. The recovery has pro- to $141/t, from $156/t a year earlier. The SN 150 premium to vided welcome respite for producers struggling for most of four-week average vacuum gasoil (VGO) prices has risen to the past two years with unusually tight margins. $250/t. But that recovery could be short-lived if demand falls The Group II N150 premium to Ice gasoil has dropped to and supply builds fast. Producers can limit that possibility $223/t, from $314/t a year earlier. The Group III 4cst pre- by preventing supply from building too quickly. That would mium has fallen to $281/t, from $399/t a year earlier. require cutting supply for the base oil market the same way US domestic N100 base oil price premiums to 30-day that they did last year. average US heating oil futures have risen to $0.40/USG, from Run-cuts are the most direct way to cut supply. Such $0.14/USG a year earlier. The N600 premium has climbed to moves are more likely as refi ners also face pressure from $0.52/USG from $0.37/USG a year earlier. The N100 premium unusually weak diesel and gasoline prices relative to crude. to VGO has risen to $0.60/USG. Some base oil producers in China have already slashed run- The Group III 4cst premium to heating oil has inched up rates sharply. to $0.90/USG, up from $0.89/USG a year earlier. Other measures include arbitrage shipments and the di- In Asia-Pacifi c, the premium of ex-tank Singapore SN 150 version of base oils into fuels markets. Base oil prices would base oil prices over Ice gasoil has dropped to $76/t, from need to be at levels that made feasible those arbitrages to $156/t a year earlier. The SN 500 premium to Ice gasoil has other outlets and other fuels markets. fallen to $92/t, from $126/t a year earlier. The SN 150 pre- But lower prices in the fuels markets have widened mium to four-week average high sulphur fuel oil prices has sharply their discount to base oil prices and made that risen to $327/t. option less feasible. A narrower discount would make the The Group II N150 premium to Ice gasoil has fallen to option more feasible. $102/t, from $126/t a year earlier. The N500 premium rose Producers have struggled over the past year to raise to $162/t from $136/t a year earlier. prices to boost tight margins because of persistent structur- Base oil values received a boost from steadier out- al oversupply. The sudden fall in crude prices has achieved right prices, while crude and diesel prices have slumped. the same goal without higher prices and with less resistance Feedstock prices have fallen since second-half January in from buyers. response to concerns about the impact of the coronavirus Producers can lock in more of those fi rmer margins by outbreak on crude and oil products demand, especially in maintaining a balance in supply-demand fundamentals. With China. demand likely to be weaker than expected in China, supply Weaker demand is likely to extend to China’s lubricants management eff orts would also need to be more extensive. market, at a time of year when consumption typically rises during the spring oil-change season. Slower demand for lubricants would curb blenders’ requirements for base oils. The base oil market has already been facing extreme pressure from structural oversupply. A seasonal pick-up in demand in markets such as China in the fi rst half of the year 阿格斯中国基础油周报 was expected to ease some of that pressure as overseas producers move more supplies to China. A slower-than-expected pick-up in demand would grow that pressure by forcing those producers to redirect supplies. Producers in Asia-Pacifi c have had time to get used to slower Chinese demand. Rising base oil production capacity in that market has made it more self-suffi cient and regional producers have adopted measures as appropriate.

Asia-Pacific

Producers maintain firm price offers amid tight supply Group I $/t Demand rises for Group I SN 500, supply tightens Low Mid High ± SN 150 ex-tank Singapore 610 630.00 650 nc Lower crude yet to prompt reversal of current run cuts SN 500 ex-tank Singapore 625 645.00 665 nc Bright stock ex-tank Singapore 780 800.00 820 nc SN 150 fob Asia 530 550.00 570 nc Asia-Pacific base oil prices have mostly held steady as lim- SN 500 fob Asia 545 565.00 585 +5.00 ited spot availability curbs pressure from lower crude prices. Bright stock fob Asia 660 680.00 700 nc Persistent pressure from weak margins had prompted widespread run cuts by the region’s Group I and Group II Group II $/t producers. Some cargoes have also been moving into the Low Mid High ± marine fuel market. Stronger demand from term buyers also N150 ex-tank Singapore 635 655.00 675 nc soaked up supplies. N500 ex-tank Singapore 695 715.00 735 nc Some producers had planned to cut run rates again in N150 fob Asia 590 610.00 630 nc March in response to low margins. Weak margins for other N500 fob Asia 605 625.00 645 nc key oil products like diesel and gasoline had raised the prospect of more extensive refinery run cuts and a subsequent Group III $/t drop in feedstock supplies for base oils. Low Mid High ±

4cst ex-tank Singapore 795 825.00 855 nc Base oil premiums rebound 6cst ex-tank Singapore 790 820.00 850 nc The sharp fall in crude prices in recent weeks has triggered 4cst fob Asia 750 770.00 790 nc a sudden rebound in those base oil margins. The ongoing 6cst fob Asia 770 790.00 810 nc weakness of motor fuel prices has boosted further the at- 8cst fob Asia 710 730.00 750 nc traction of base oils. But any moves to reverse existing run cuts or to halt Ex-tank Singapore reference prices $/t planned run cuts in response to higher margins are taking Group I Group II time to decide on and implement. Some refiners were still in SN 150 SN 600 Bright stock N150 N500 the process of finalising their production plans for the month 755.00 765.00 895.00 780.00 790.00 of March. One producer was facing delays with loadings because of logistical issues. Weaker-than-usual Chinese demand before the lunar new Asia SN 500 forward prices $/t year had helped to cushion the impact of the more limited Low High ± spot availability in the region. The move had also left Chi- Feb 2020 555.00 575.00 +5.00 nese buyers with low stocks. Mar 2020 556.00 576.00 +5.50 Demand from China had been expected to remain more Apr 2020 555.10 575.10 +6.15 2Q 2020 553.40 573.40 +6.95 muted than usual this month because of a slowdown in 3Q 2020 551.50 571.50 +9.60 travel and factory activity in this market in response to the The price shows the implied forward-curve base oil price required to maintain coronavirus outbreak. its existing profit margin relative to Ice gasoil futures. Refer to www.argusmedia.com for methodology Group I cargoes head for China But expectations of slower demand has prompted steep and Asia SN 500 forward premium to gasoil $/t widespread run cuts by China’s base oil producers. Buyers Midpoint ± seeking base oils to replenish their stocks have had to turn Feb 2020 19.00 +30.50 to overseas producers instead to cover more of their require- Mar 2020 18.00 +29.95 ments. Apr 2020 18.90 +29.35 This firmer demand has added to competition for limited 2Q 2020 20.65 +28.55 spot volumes in the region, especially for Group I base oils. 3Q 2020 22.55 +25.90 Several February-loading cargoes of Thai origin have The premium shows the implied forward-curve profitability of fob Asia SN 500 been lined up to move to China. The shipments included relative to Ice gasoil futures. Refer to www.argusmedia.com for methodology several cargoes of bright stock and a cargo of SN 500. The bright stock cargoes were sold at similar or slightly lower

Asia-Pacific levels than current published prices. The SN 500 cargo was Crude $/bl sold at firm price levels. The price was higher than the most ± recent sale of one SN 500 cargo last month. Dubai crude front month 54.50 -2.88 There had been firm buying interest for the SN 500 cargo SN 500 premium to Dubai crude 25.13 +3.58 from within the region and in more distant outlets like the Mideast Gulf. The stronger buying interest reflected the lack Oil products $/bl of alternative sources of the product. ±

Singapore 0.05% gasoil 67.25 -1.00 Run cuts sustain supply tightness Gasoil premium to Dubai crude 12.02 +1.25 Supplies of the heavy-grade product have tightened in SN 500 premium to gasoil 12.38 +1.70 response to prolonged and ongoing run cuts throughout the region. The limited availability has boosted interest in supplies of Japanese origin. But run cuts in that market have Vessel enquiries: Asia-Pacific t also curbed spot availability. Loading port Next port B/L Date Volume Lower crude prices have helped to boost margins for the product. But producers have maintained their run cuts, with Onsan Haiphong Feb 1,750 Yeosu Kandla/Pipavav 10-20 Feb 2,000 those lower costs yet to pass through to the refineries. Southeast Asia Kakinada Mid Feb 1,000 Higher prices for heavy grades prompted one distributor Source: shipping agents, brokers to sell at a higher price to a buyer in southeast Asia some supplies that it had been holding in its stocks. Some flexibag volumes of heavy neutrals were also available on a fob basis at similar prices to ex-tank Singapore Chinese buyers seek imports prices. The slowdown in Chinese lube consumption and production Some producers were receiving more requests from has curbed demand for some regional supplies. But the sharp Indian buyers for Group I supplies. A slowdown in Iranian drop in base oil production in that market has sustained firm shipments has tightened availability in that market. buying interest in supplies from other sources like Taiwan. A producer in southeast Asia was targeting February This market’s producer has maintained steady output. But prices for flexibag volumes of light grades that were some domestic demand in Taiwan has also slowed sharply. Blend- $60/t higher than last month. It was targeting bright stock ers were facing a rise in cancelled orders in response to a prices that were some $50/t higher than last month. sharp slowdown in industrial and travel activity. A producer has resumed normal operations this month. Producers maintain offers It had previously been producing less heavy grades. The Group II base oil prices have also received support from resumption of normal operations has resulted in less output limited spot availability, especially of heavy grades and of very light grades. very-light grades. One producer cleared quickly in the Indian market a small volume of light-grade base oils. Group III prices cut One producer is set to have less supply because of Ex-tank prices in Singapore were mostly steady. upcoming run cuts. Another producer had planned to cut Offers for Group I SN 500 were pegged at $625/t ex-tank run rates. The recent drop in crude prices has prompted the and at $815/t for bright stock. refiner to reconsider this move, especially in view of the Offers for Group II N150 were steady at $650-660/t, and weakness of motor fuel prices. at $690-695/t for heavy grades. Offers for flexibag supplies Producers’ moves to maintain steady price offers have on a cfr southeast Asia basis were about $10-20/t higher than closed off other outlets like the bunker fuel market or the these levels. arbitrage to the US. They planned to persist with these of- Prices for Group III 4cst and 6cst with approvals were cut fers even if demand slowed. Most of them have already sold by $20/t to $970/t ex-tank. The last time these prices were their term and any spot volumes for February. One of them cut was last October. The new price was the lowest since had sufficient storage capacity to absorb supplies for a few 2017. Offers for 3cst base oils were cut by $10/t to $870/t months if there was a slowdown in demand. ex-tank.

NorthEast Asia

Widespread run cuts leave supply increasingly tight Group I $/t Demand holds firm as stock replenishment begins Low Mid High ± SN 150 cfr 580 600.00 620 nc Chinese buyers turn to overseas producers for supplies SN 500 cfr 595 615.00 635 nc Bright stock cfr 720 740.00 760 nc Northeast Asia base oil prices have remained firm, supported by steady demand in China and lower supplies. Group II $/t Chinese lube consumption has slowed as measures to halt Low Mid High ± the coronavirus outbreak in the country have curbed travel N150 cfr 610 630.00 650 nc and factory activity. Many provinces in China have extended N500 cfr 625 645.00 665 nc the lunar new year holiday for another week to 9 February in a bid to contain the outbreak. Group III $/t This drop in activity and lower-than-expected fuel Low Mid High ± consumption has prompted many of China’s refineries and 4cst cfr 630 655.00 680 nc base oil units to cut their run rates in response. The shut- 6cst cfr 640 665.00 690 nc downs and run cuts have reduced supply. The drop in supply 8cst cfr 620 645.00 670 nc is balancing out the slowdown in demand. Some logistical disruptions are also curbing availability. Ex-tank East China Yn/t $/t Low Mid High ± Low Mid High ± Low stocks spur buying interest Many Chinese producers, distributors and buyers already Group II had low stocks. They had cut their inventories in the weeks N150 7,10 0 7,200.00 7,30 0 nc 1,019 1,033.00 1,047 -5.00 ahead of the lunar new year holiday in late January. They N500 7,20 0 7,300.00 7,4 0 0 nc 1,033 1,0 47.50 1,062 -5.00 Group III were comfortable that they could secure supplies with 4cst 7,850 8,000.00 8,150 nc 1,126 1,147.50 1,169 -6.00 relative ease after the holiday, especially from domestic 6cst 7,950 8,100.00 8,250 nc 1,141 1,162.50 1,184 -5.00 producers. 8cst 7,750 7,900.00 8,050 nc 1,112 1,133.50 1,155 -5.00 Some buyers have now continued to seek to replenish stocks, even with the current slowdown in activity. They sought to boost inventories in preparation for the spring oil China domestic prices change season. They expect demand to be even stronger Yn/t $/t and buyers' stocks to be even lower when normal activity Low High ± Low High ± resumes. Group I, SN 150 Northeast Domestic supply tightens Daqing 6,650 6,750 nc 954.00 968.00 -5.00 But these plans to tap domestic producers for supplies have Dalian 6,650 6,750 nc 954.00 968.00 -5.00 had to change. Availability from these refiners is now tighter North Yanshan 6,750 6,850 nc 968.00 983.00 -4.50 than expected after they cut their run rates in anticipation South of weaker demand. Some run cuts have been especially Maoming 6,350 6,450 nc 911.00 925.00 -4.50 steep. Some plants have been shut down. Group I, SN 400 The run cuts included both independent refiners and Northeast state-operated plants. PetroChina’s Group I base oil unit in Fushun 6,650 6,750 nc 954.00 968.00 -5.00 Dalian had cut its run rates even before the lunar new year Dalian 6,650 6,750 nc 954.00 968.00 -5.00 holiday in response to weak margins. The run cut is expect- South ed to remain in place for an extended period of time. Maoming 6,350 6,450 nc 911.00 925.00 -4.50 There was no availability of supplies from the unit. The Group II, N150 producer has yet to resume sales after the lunar new year East holiday. Offers for supplies held at the previous levels of Gaoqiao 6,650 6,750 nc 954.00 968.00 -5.00 South 6,700 yuan/t ex-refinery for SN 150 and Yn6,800/t for SN Huizhou 6,700 6,800 nc 961.00 976.00 -4.50 400.

NorthEast Asia

The drop in availability from domestic producers has China import price calculator * prompted buyers to turn to imported supplies to cover more Yn/t $/t Low High ± Low High ± of their requirements. But price offers for regional supplies have also held Group I (imported prices) firm. Supply was also increasingly tight as refinery run cuts SN 150 6,776 7,110 +24 972.00 1,020.00 -2.00 extended to other plants in the region. Some run cuts have SN 500 6,901 7,235 +24 990.00 1,038.00 -1.50 Bright stock 7,945 8,279 +30 1,140.00 1,188.00 -1.00 already been in place for several months. Group II (imported prices) A cargo of bright stock of Thai origin was sold to a buyer N150 7,027 7,361 +26 1,008.00 1,056.00 -1.00 in China. The price on a cfr China basis was higher than N500 7,152 7,4 86 +26 1,026.00 1,074.00 -1.00 published price levels. * inc. 6% customs duty, 13% VAT and 1,711.52 Yuan/t consumption tax.

Bright stock holds firm Some distributors have targeted higher bright stock offers at above Yn8,250/t, reflecting their limited availability. Some distributors had maintained lower offers of around Yn8,100- 8,150/t on an ex-tank basis in east China. Logistical issues were complicating the availability of The run cuts have added to the tighter availability. bright stock from PetroChina’s Karamay plant. Logistical restrictions also curbed producers’ ability to move Group II base oil prices have held firm, despite the drop supplies to buyers. Road transport restrictions imposed on in crude prices and lower white oil prices. Prices have re- independent producers in Shandong province have now been ceived support from tight availability in China and delays to eased. the shipment of replenishment supplies to the country. CNOOC kept steady its price offers for supplies of N60 Producers in Taiwan and South Korea also maintained and N150 from its Huizhou plant at Yn5,600-5,700/t ex- their cargo prices. refinery. But it has yet to resume sales of these supplies following the lunar new year holiday. The supplies were Imported supplies remain tight categorised as white oils. Distributors have mostly sold out their spot supplies of Tai- Hengli Petrochemical has moved supplies to buyers by wan origin. There have so far been no moves by distributors vessel. The move has enabled it to avoid the land transport to delay or cancel the shipment of replenishment supplies. restrictions that other producers have faced. Its prices have Notional price offers for N150 of Taiwan origin held at mostly held at around Yn5,500/t ex-refinery. around Yn7,250/t ex-tank in east China. Offers for N500 held Panjin Northern Asphalt cut its run rates and some of at around Yn7,30 0 -7,4 0 0/t. its prices. It lowered by Yn200/t its offers for heavier-grade While domestic price offers held steady, firmer prices base oils, with N350 priced at Yn6,256/t ex-refinery. Its for imported cargoes combined with the recent deprecia- prices for N100 and N150 held at Yn6,206/t and Yn6,406/t tion of the Chinese currency have narrowed the arbitrage for ex-refinery. importing shipments from regional suppliers. The trend has prompted distributors to continue to target higher domestic Group III holds firm price offers for the supplies once they are delivered. Group III base oil prices have also held firm. Offers were in a wide Yn8,000-8,800/t ex-tank range for supplies with some Producers trim light-grade white oil prices OEM approvals and from different producers. Some distribu- China’s white oil producers have responded more directly to tors maintained their plan to raise their prices. the drop in crude and diesel prices, especially for their very- A larger-than-usual volume of supplies of Mideast Gulf light grade supplies. These supplies can be diverted more origin has moved to China. These will help to cover require- easily into the diesel pool. ments during the month-long shutdown of a Group III base Producers in Shandong province have trimmed their run oil unit in that region in the coming weeks. rates by 20-50pc. They have cut their prices by Yn50-200/t. Domestic diesel prices in east China have fallen to The price cut was larger for the lighter grades. Yn6,409/t from Yn6,659/t on 23 January.

India

Buyers target lower prices after crude prices slide Group I $/t Buyers continue to seek more very-light grades Low Mid High ±

Producers target steady prices amid tighter supply SN 150 cfr 600 620.00 640 +10.00 SN 500 cfr 605 625.00 645 +10.00

SN 150 (LVI) cfr 570 590.00 610 +10.00 Indian base oil prices were steady amid a steep slide in feedstock and diesel costs since second-half January. But SN 500 (LVI) cfr 575 595.00 615 +10.00 demand has remained firm for very-light grade base oils, Bright stock cfr 685 705.00 725 +5.00 while supply is limited. Group II $/t The relatively firmer fundamentals have cushioned for Low Mid High ± now the impact of lower crude prices and eased the down- ward price pressure. The recent volatility of crude prices has N70 cfr 650 670.00 690 nc added to a reluctance to respond immediately. N150 cfr 630 650.00 670 nc

Offers of spot supplies from northeast Asia have re- N500 cfr 640 660.00 680 nc mained at levels that were similar to before the fall in crude prices. Buyers deemed these offers to be too high. Group III $/t Low Mid High ±

Discussions turn to March 4cst cfr 665 685.00 705 nc But several producers have already sold their spot and term 6cst cfr 665 685.00 705 nc volumes for February. They were in little rush to start nego- 8cst cfr 650 670.00 690 nc tiations for March supplies. The prospect of refinery run cuts was also raising uncertainty over whether buyers would receive their full term Domestic refinery prices volumes. Some producers had already implemented or were Rs/l * ± $/t ± mulling such cuts for base oils because of weak margins in Group I recent months. More extensive refinery run cuts in response IOC prices, Chennai to weaker fuel demand would exacerbate any such cuts. SN 70 68.50 +0.40 1,180.00 +13.00 Some cargo loadings from northeast Asia were also taking longer amid measures to curb the spread of the coronavirus SN 150 63.00 +0.40 1,020.00 +12.00 outbreak that began in China. Logistical issues were adding SN 500 59.05 +0.10 940.00 +6.00 to delays. Bright stock 78.80 +0.20 1,230.00 +10.00

Buyers have sought to cover more of their requirements IOC prices, Mumbai with term supplies, especially because some of these con- SN 70 66.50 +0.40 1,146.00 +13.00 tracts included a link with regional gasoil prices. The prices would have partially reflected the fall in gasoil prices from SN 150 61.00 +0.40 988.00 +12.00 mid-January. SN 500 54.55 +0.10 869.00 +7.0 0 Bright stock 76.80 +0.20 1,198.00 +9.00

Lower crude lifts margins Group II Regional gasoil prices averaged $566/t in January, down IOC prices, Chennai from $584/t in December. They had averaged $595/t in first- N70 90.21 -2.15 1,515.00 -28.00 half January, reflecting the volatility of prices during the month. N150 63.80 +0.40 1,056.00 +12.00 The fall in crude and gasoil prices has spurred a surge N500 59.81 +0.10 978.00 +7.0 0 in base oil values relative to diesel. The premium of cfr IOC prices, Mumbai

India N150 over regional gasoil prices has risen to more N70 69.20 +0.40 1,162.00 +13.00 than $160/t. The premium was up from less than $40/t in N150 61.80 +0.40 1,023.00 +12.00 early January and its highest since end-2018. The cfr N500 N500 55.75 +0.10 911.00 +6.00 premium to gasoil has rebounded in a similar way. But it * prices in Rs/l effective from 01 Feb remained low compared with its pre-2018 levels.

India

In recent years, a rise in base oil values like this along Vessel enquiries: India t with lower crude has prompted buyers to back off. They Loading port Next port B/L Date Volume sought to curb their exposure to the prospect of a fall in Yeosu Kandla/Pipavav 10-20 Feb 2,000 base oil prices. Southeast Asia Kakinada Mid Feb 1,000 They still expect base oil prices to ease from current lev- Source: shipping agents, brokers els. But concern about a sharper price drop was more muted than usual. Some buyers sought more volumes in preparation for a typical rise in lube sales in March, the final month of availability in southeast Asia and northeast Asia was increas- the financial year. ingly tight. Surplus availability from Europe was limited, Demand for very-light grade base oils was especially while the arbitrage was shut. strong. More limited term supplies of these grades have add- There was availability of supplies of light and heavy neu- ed to the ongoing interest in spot volumes. But spot avail- trals originating from north Africa. But price offers for these ability of 2cst base oils especially was increasingly limited. supplies were also too high to make the arbitrage feasible. Prices for supplies of US origin were also too high to attract Spot availability dwindles buying interest. There was limited availability of spot volumes from Asia-Pa- India’s domestic producers raised their light-grade cific. The offers for Group II light grades that were available prices for February by 0.40 rupees/litre ($0.01/l). The price were similar to current market prices. One producer planned increase maintained at a similar level their premium to im- to start its negotiations for March supplies in second-half ported base oil prices in US dollar terms. February. Its inventories were at comfortable levels. Pakistan refiner NRL plans to offer through a tender Supplies from Taiwan have continued to target the around 2,000t of bright stock for loading in February. The Chinese market. Some term volumes from this market have refiner has yet to decide if the product will be high-viscosity continued to move to India. A cargo with at least 3,000t of index or medium-viscosity index bright stock. These ship- light and heavy grades is expected to reach India in the com- ments typically move to the UAE. ing days. The arbitrage to move supplies from the US remained shut. Availability from this market has also tightened. Prices have anyway been too high to attract any buying interest. The dearth of arbitrage supplies from the US contrasted with this time last year, when several large cargoes were fixed to move to India from that market. The volume of supplies from the Mideast Gulf to India rose last month compared with December. But volumes remained lower than November. The more limited availability of Group II light grades has Global Group II base oil prices $/t boosted interest in Group III supplies. Several cargoes from different producers in the Mideast Gulf moved to India last Argus N150 cfr India Argus N150 fob Asia Argus N100 fob US month. There remained interest in securing more of these 750 supplies to move to both India and Pakistan. Several of India’s domestic producers have sold out of or 700 have no supplies of Group I and Group II base oils. One plant began scheduled maintenance earlier this month. 650

Group I availability tightens Availability of Group I supplies was also more limited, while 600 demand was firmer for heavy grades especially. The flow of shipments from Iran has slowed since early last month. Any 550 pick-up in volumes is not expected for at least a month. Spot 15 Feb 19 14 Jun 19 11 Oct 19 7 Feb 20

Mideast Gulf

Buyers seek Group III supplies as Group I tightens Group I $/t Iranian Group I cargoes set to remain limited in February Low Mid High ± SN 150 cfr UAE 605 625.00 645 +5.00 Ex-tank Group I SN 500 prices rise on tight availability SN 500 cfr UAE 615 635.00 655 +5.00 SN 150 (LVI) cfr UAE 560 580.00 600 +5.00 SN 500 (LVI) cfr UAE 545 565.00 585 +5.00 Mideast Gulf base oil prices have held firm. Tighter availability and firmer prices for Group I base oils have boosted Group II $/t interest in premium-grade supplies. Low Mid High ± Spot supply of Group II base oils was also more limited, N150 ex-tank UAE 625 645.00 665 nc especially of heavy grades. Most of the supplies of US origin N500 ex-tank UAE 665 685.00 705 nc that reached the region in December-January moved to consumers. The scant availability of additional arbitrage Group III $/t shipments has boosted interest in Group III base oils within Low Mid High ± the region. There has been some spot availability of these Group III 4cst ex-tank UAE 690 710.00 730 nc 6cst ex-tank UAE 700 720.00 740 nc supplies. Some shipments have been moved or sold recently 8cst ex-tank UAE 710 730.00 750 nc to buyers in the Mideast Gulf and India. But unusually large shipments from a different producer have also moved to more distant markets like China and the US. The shipments Vessel enquiries: UAE t will boost distributors’ stocks in these markets and help Loading port Next port B/L Date Volume cover requirements during the planned shutdown of a Group Sohar Nigeria Prompt 1,000 III plant in the coming weeks. Source: shipping agents, brokers Interest in Group III base oils of Mideast Gulf origin has extended to other regional markets like Pakistan and India. Negotiations were taking place over the procurement of some of these supplies. they were comfortable to wait until prices moved closer to The pick-up in interest in Group III base oils reflected the levels that they were targeting. They were expecting some buyers’ difficulty covering their requirements with such a price adjustment in view of the recent fall in crude Group I and Group II base oils. prices. Spot availability of Group I base oils in the region Some buyers have resorted to covering requirements on a remained limited. A slowdown in shipments from Iran to need-to basis with smaller volumes from the ex-tank market. the UAE began in early January. It is expected to continue Some buyers have been looking at securing more supplies at least for this month. Shipments from Iran typically slow of Russian origin. Some of them procured supplies from this down in March, ahead of holidays later in the month to cel- market to cover their January requirements. ebrate the Iranian new year. For now, a smaller-than-usual Ex-tank Group I SN 500 prices have risen in response to number of March-loading shipments were being offered. the tighter availability. Some sellers have sought to leverage that tightness by raising their offers even more sharply. Arbitrages stay shut Some offers have risen as high as $580/t ex-tank. Other Spot availability of Group I base oils from other sources was offers were in a $550-570/t ex-tank range. Offers for SN 150 also tight. Some volumes were committed to term contracts. were steadier at around $570/t. Offers for bright stock held Prices for European supplies remained too high to make the at around $700-720/t ex-tank. arbitrage feasible. Demand has risen for Group III ex-tank supplies in re- Availability in Asia-Pacific was tight. Prices were also too sponse to more limited availability or relatively higher prices high. Some supplies were available from north Africa. But for Group II supplies. prices for these supplies were also too high to attract buying Availability of Group III supplies has improved. Price of- interest. fers were steady at $710/t for 4cst base oils, and $10-20/t Some buyers faced little urgency to secure supplies for higher than that for 6cst and 8cst supplies. Some supplies now. Some of them had made enquiries for supplies. But were available at a discount to these levels.

Europe

Tight supply supports firmer Group I export prices Group I $/t Market mulls Group II tax impact on spot prices Low Mid High ± SN 150 fob domestic NWE 660 682.50 705 +5.00 Group III prices get support from more balanced supply SN 500 fob domestic NWE 685 705.00 725 +5.00

Bright stock fob domestic NWE 735 755.00 775 nc European Group I domestic and export base oil prices are SN 150 fob European export 580 600.00 620 +15.00 firmer amid tighter supply availability in both markets. Group II base oil prices are steady amid balanced fundamen- SN 500 fob European export 600 620.00 640 +10.00 tals. More Group III sellers have targeted higher spot prices Bright stock fob European export 640 660.00 680 nc for this month as rising demand soaks up more of the surplus supply. Group II €/t $/t Low Mid High ± Low Mid High ±

Producers maintain firmer prices N100 fca ARA 700 717.50 735 nc 769 788.00 807 -3.50

Regional Group I base oil prices have remained firm, even af- N150 fca ARA 695 712.50 730 nc 763 782.50 802 -3.50 ter crude futures fell by as much as $10/bl since second-half N220 fca ARA 715 735.00 755 nc 785 807.0 0 829 -4.00 January. The lower feedstock costs have helped to support a N600 fca ARA 735 757.50 780 nc 807 832.00 857 -3.50 rebound in refiners’ base oil margins. Pressure on producers to reflect the lower feedstock costs has been more muted than usual. The steady prices Group III €/t $/t reflect support from firmer fundamentals that are counter- Low Mid High ± Low Mid High ± ing pressure from lower crude prices. 4cst fca NWE 705 765.00 825 +5.00 774 840.00 906 +2.00

Some producers have held off planned moves to raise 6cst fca NWE 750 807.50 865 +5.00 824 887.0 0 950 +1.50 prices following the drop in crude prices. Some of them have 8cst fca NWE 715 775.00 835 +5.00 785 851.00 917 +1.50 gone ahead with these plans in response to growing demand and balanced-to-tight supply. Price increases for February Group III (a) * €/t $/t have been in a $5-20/t range, depending on the producer, Low Mid High ± Low Mid High ± grade and volume. Spot availability of SN 150 is tighter than SN 500 and 4cst fca NWE 770 805.00 840 nc 846 884.50 923 -3.50 bright stock. Many producers with any surplus volumes have 6cst fca NWE 810 845.00 880 nc 890 928.50 967 -3.50 only certain grades available rather than all grades. Pockets 8cst fca NWE 785 820.00 855 nc 862 900.50 939 -4.00 of tightness, especially for some grades, have spurred a pick- * Group III (a) refers to base oils which have Volkswagen Oil Quality Standard VW up in the movement of trucks and cargoes within the region. 504 00/507 00 certification The ongoing shutdown of a base oils unit in northwest Europe since last September has prompted buyers to seek Group III (b) * €/t $/t alternative supplies instead. There remained sufficient avail- Low Mid High ± Low Mid High ± ability to cover these requirements. 4cst fca NWE 690 715.00 740 +5.00 758 785.50 813 +2.00 Most of the refiners in the Mediterranean region have 6cst fca NWE 705 730.00 755 +5.00 774 801.50 829 +2.00 cut export supply. They are focusing on covering just their 8cst fca NWE 700 725.00 750 +5.00 769 796.50 824 +2.00 domestic customers’ requirements and on tapping higher * Group III (b) refers to base oils which do not have Volkswagen Oil Quality Stan- prices in regional markets. dard VW 504 00/507 00 certification A plant in eastern Europe will shut down from the start of the second quarter for a month for scheduled maintenance. The producer has been stockpiling supplies in prepa- Turkey Group I $/t ration for the maintenance. It expects no impact on supply Low Mid High ± to term customers. SN 150 cfr Gebze 580 600.00 620 +5.00 The shutdown is the first confirmed Group I plant main- SN 500 cfr Gebze 605 625.00 645 +5.00 tenance in Europe this year. Regional supply has been tight even without a heavy round of maintenance. The producer will begin construction of new loading facilities when the shutdown begins. It plans to be able to

Europe supply customers with flexitanks by the second quarter of Crude $/bl 2021. ± Rhine water levels have returned to normal this week. Ice Brent front month ($/bl) 54.93 -3.36

The higher water levels have allowed fully-loaded barges to North Sea Dated 54.08 -3.66 pass though the bottleneck at Kaub. Lower water levels had SN 500 premium to North Sea Dated 33.30 +5.07 restricted and delayed some inland shipments of base oils in recent weeks. Oil products ± Move to share costs Ice gasoil front month ($/t) 507.75 -1.25 Group II base oil prices have held steady. Sellers and buyers have begun to negotiate how new import tax costs will Heating oil 0.1% barge ($/t) 493.75 -3.50 be allocated to term and spot buyers. Some sellers plan to Vacuum gasoil 0.5% barge ($/t) 451.75 -19.13 increase prices later in the first quarter. Vacuum gasoil 2.0% barge ($/t) 429.88 -20.62

Prices for light-grade supplies were in a €690-770/t range Fuel oil 3.5% barge ($/t) 259.50 -4.50 on an ex-tank basis. Prices for heavy grades were in a €720- Straight run M-100 fuel oil cargo ($/t) 309.50 -19.50 795/t range. Oil products premiums There is uncertainty about the Group II base oil import monitoring system and what volumes are being included in Heating oil premium to crude ($/bl) 12.25 +3.19 the quota calculated by the EU Commission. Imports above Heating oil premium to VGO 2.0% ($/bl) 3.25 +2.56 200,000t for the first six months of the year from the US and SN 500 premium to heating oil ($/bl) 21.05 +1.88

Mideast Gulf would be subject to a 3.7pc import tax. SN 500 premium to VGO 2.0% ($/bl) 24.30 +4.44

Group III fundamentals improve European forward prices $/t Group III base oil sellers were targeting higher prices for sup- SN 150 SN 500 plies with and without OEM approvals. Sellers with approvals Low High +/- Low High ± were targeting increases of €10-20/t. Sellers with supplies Feb 2020 590.00 610.00 +15.00 610.00 630.00 +10.00 without approvals were targeting a €5-10/t rise in prices. Mar 2020 591.00 611.00 +15.50 611.00 631.00 +10.50 The Group III base oils market remains well supplied. But Apr 2020 590.10 610.10 +16.15 610.10 630.10 +11.15 2Q 2020 588.40 608.40 +16.95 608.40 628.40 +11.95 the size of the surplus has begun to ease compared with the 3Q 2020 586.50 606.50 +19.60 606.50 626.50 +14.60 end of last year. The price shows the implied forward-curve base oil price required to maintain Prices for partially approved or non-approved base oils its existing profit margin relative to Ice gasoil futures. were in a narrower €690-810/t range. Prices for supplies Refer to www.argusmedia.com for methodology with the full set of approvals were also in a narrower €750- European forward premium to gasoil $/t 1,000/t range. SN 150 SN 500 A Group III supplier is increasing its Group III+ produc- Midpoint ± Midpoint ± tion. The move is reducing its spot availability of Group III Feb 2020 54.00 +40.55 74.00 +35.55 base oils for the European market. The seller has targeted Mar 2020 53.00 +40.00 73.00 +35.00 higher spot price levels for these supplies. Apr 2020 53.90 +39.40 73.90 +34.40 Rising demand for and availability of Group III+ base oils 2Q 2020 55.65 +38.60 75.65 +33.60 3Q 2020 57.55 +35.95 77.55 +30.95 in Europe has coincided with a drop in polyalphaolefin (PAO) The premium shows the implied forward-curve profitability of fob Europe SN 150 prices since the end of last year. and SN 500 relative to Ice gasoil futures. Refer to www.argusmedia.com for methodology Export supply tightens Export base oil prices were firmer. There was a dearth of Vessel enquiries: Europe t spot bulk cargoes available for February loading from regular Loading port Next port B/L Date Volume exporters. Slack overseas demand or bids at lower levels Sohar Nigeria Prompt 1,000 cushioned the impact of the tighter supply. Rotterdam Nigeria Prompt 1,000 Augusta Valencia/Rdm 15-17 Feb 9,500 Most exporters in the Mediterranean region are not of- Augusta USGC 16-18 Feb 4,000 fering any bulk volumes. Some of them were offering just Source: shipping agents, brokers flexitank supplies.

Europe

Availability was tight despite the limited round of plant European Group I/II/III comparison, light grades €/t maintenance early this year. Supply has tightened instead because of a combination of factors. These included run SN 150 fob domestic NWE N150 fca ARA 4cst fca NWE 850 cuts and some refiners’ switch to using lighter, sweeter crudes ahead of the implementation of the IMO sulphur cap 800 on marine fuels. Some refiners have prioritised the produc- 750 tion of other fuels like low-sulphur fuel oil. Producers have also reserved their more limited availability for the domestic 700 hhh market and term customers. More buyers are looking at the possibility of loading flexi- 650 tanks. These volumes remain available in the export market. 600 There is rising competition for these supplies. The competition is putting upward pressure on prices. 550 One producer may have cargoes available for second-half 8 Feb 19 7 Jun 19 4 Oct 19 7 Feb 20 February. Supply may rise as falling crude bolsters base oil margins and the attraction of raising production. There is some demand from west Africa and north Africa. There is growing interest in covering this demand with sup- European Group I/II/III comparison, heavy grades €/t plies from the Baltic market, where prices are at a widening discount to European prices. SN 500 fob domestic NWE N220 fca ARA 6cst fca NWE 900 An Egyptian refinery has restarted production of bitumen following maintenance that began in October 2017. Base oils 850 and paraffin wax production has also likely resumed. The 800 refinery had initially targeted a restart in first-half and then second-half 2019. But various issues prompted it to postpone 750 hhh the restart each time. During the shutdown, the producer had issued regular 700 tenders requesting around 12,000-15,000t of bright stock 650 each quarter. The supplies mostly came from Europe. Some supplies began to originate from other regions at 600 the end of 2019, including a producer in the Mideast Gulf. 8 Feb 19 7 Jun 19 4 Oct 19 7 Feb 20 Its tender for up to 15,000t in the first quarter of this year is being supplied from this region.

European Group II vs Group I €/t European Group III vs Group II €/t

N150 minus SN150 N600 minus SN 500 4cst minus N100 6cst minus N150 8cst minus N220 250 150

125 200 100

150 hhh 75 hhh

50 100 25

50 0 8 Feb 19 7 Jun 19 4 Oct 19 7 Feb 20 8 Feb 19 7 Jun 19 4 Oct 19 7 Feb 20

At this year’s London forum, Argus will be discussing the causes and repercussions of the recent rise in supply. We will look at the global outlook, along with regional perspectives and the challenges and opportunities that these create over the year ahead.

Petroleum Register for this complimentary forum at: illuminating the markets http://view.argusmedia.com/base-oils-forum-2020

Global base oils fundamentals data To facillitate analysis and planning To highlight trends and opportunities

Downloadable data • Total imports and exports • Trade data with breakdown by individual countries • Base oils/lube production • Base oils/lube consumption • Plant maintenance and shutdowns Contact us to request more information: • New plants and recent expansions [email protected]

Market Reporting Petroleum Consulting illuminating the markets Events

Licensed to: Shi Jia Lim, Argus Media Limited (London) Argus Base Oils Issue 20-6 | Friday 7 February 2020

Europe

TURKEY Freight rates to Gebze, Turkey $/t Route 3,000t 5,000t Route 3,000t 5,000t Buyers hesitate over higher cargo price offers Black Sea 35-37 28-30 Antwerp 60-63 50-52 Group I, II, III price parity encourages switching Augusta 41-43 31-33 Baltic 90-95 80-83 UAE 95-100 85-98 Turkey’s imported Group I base oil prices have risen amid * provided at market close on 07 February by Borachart (www.borachart.com) tighter supply availability from the Mediterranean, Black Sea and Baltic markets. Weak demand has dampened the upwards price pressure. mained at an unusually steep premium to imported cargoes. But more limited supplies in the Mediterranean are curbing The price gap has given buyers more room to pay more for Turkish importers’ leverage to avoid the higher prices that imports and still sell the supplies on an ex-tank basis at sellers are targeting. competitive levels. A 4,000t cargo of Group I base oils was offered to an The producer has kept its prices stable since the end importer at the mid- to high range of Argus European export of December, even as crude prices have slumped in recent prices. No deal was done. But the buyer faces limited alter- weeks. Its price for SN 150 held at 4,340 Turkish lira/t native options. ($726/t) and at TL4,410/t for SN 500. Its offer for bright No spot supplies of base oils for February loading have stock was at TL5,000/t and at TL4,380/t for SN 100. The been offered from the Russian producer in the Black Sea. Its prices do not include an additional loading fee of TL93/t. supplies are instead moving to term buyers and its marine The price for these Group I supplies is the same as the blending subsidiary from ports in northwest Europe. price of Group II base oils with approvals and Group III base Imports from Baltic ports have slowed down. Supply oils without approvals. The similar prices are encouraging availability in this region is more limited than in recent blenders to switch to lower cost Group I imports or higher months. Prices for these supplies are also facing upwards quality Group II and Group III base oils that are available on pressure. High transport costs from the Baltic region to Tur- an ex-tank basis. key make the arbitrage feasible only when Baltic prices are Prices for Group II base oils are in a $710-860/t range lower than usual. on an ex-tank basis. Flexitank supplies from Asia Pacific are Even as price offers rise for imported cargoes, these available at around $800/t on a delivered basis. supplies remain more attractive than base oils from Turkey’s Prices for Group III supplies have held in an $800-860/t sole domestic producer. Prices for its supplies have re- ex-tank range for 4cst, 6cst and 8cst base oils.

Turkey’s key Base oil suppliers - Nov 2019 t

Russia 3,473 Belgium 0 US 0 Poland 0 Netherlands 473

Germany 54 Hungary 0 Ukraine 0 Uzbekistan 0 France 68

Serbia 0 Turkmeninstan 0 Spain 0 Italy 6,581

Greece 12,662 Morocco 0 Iran 79

Brazil 0 India 0

Russia and FSU

Prices hold firm despite lower crude prices Baltic Sea Group I $/t Tighter supply, steady demand support prices Low Mid High ± SN 150 fob 485 502.50 520 nc Gazpromneft sells out of small volume of Feb supplies SN 500 fob 490 510.00 530 nc

Base oil prices have held firm in the Baltic market as stron- Black Sea Group I $/t ger supply-demand fundamentals counter pressure from Low Mid High ± lower feedstock prices. Prices were steady in the Black Sea SN 150 fob 445 465.00 485 nc region amid limited spot availability. Prices stayed low in the SN 500 fob 465 485.00 505 nc Naushki market to remain competitive with domestic sup- Naushki Group I $/t plies in China. Low Mid High ± Supply from producers in the region has tightened. Rus- sian producer Gazpromneft offered only a small volume of SN 150 cpt 350 370.00 390 nc SN 500 cpt 355 375.00 395 nc spot supplies for February, ahead of plant maintenance at one of its plants. An additional tender from Rosneft to sell Russian base oils, lubes rail/river exports ‘000t unsold February supplies has yet to materialise. Belarus’ Jan Dec ± Jan Dec ± Naftan refinery is unlikely to have any base oils for export until at least March. Rail Overland 47.85 40.99 +6.87 Baltic 40.79 53.98 -13.19 Afganistan 0.00 0.07 -0.07 Kaliningrad 12.85 18.36 -5.51 Tighter supply extends to other markets Armenia 0.00 0.00 nc Liepaja 4.34 4.00 +0.34 Spot availability of supplies from European plants has also Azerbaijan 0.83 0.80 +0.03 Riga 19.68 26.20 -6.52 tightened. The arbitrage to move Group I supplies from the Belarus 2.77 4.57 -1.80 Ventspils 2.68 3.46 -0.78 US to Africa is shut. The possibility of a ban on imports of China 5.51 3.72 +1.79 St.Petersburg 1.24 1.96 -0.72 naphthenic base oils to Nigeria is likely to have the largest Hungary 0.00 0.00 nc North Korea 0.00 0.00 -0.00 Black Sea 28.66 13.63 +15.04 impact on the US market. Finland 1.87 1.59 +0.28 Taganrog 18.43 4.98 +13.45 The more limited availability of supplies from these Kazakhstan 7.69 4.39 +3.30 Yeisk 3.24 0.00 +3.24 sources has supported firmer demand for supplies from the Kyrgyzstan 0.24 0.71 -0.47 Kavkaz 1.65 1.35 +0.29 Baltic market. But buyers in more distant markets have Latvia 2.98 3.00 -0.02 Novorossiysk 5.34 3.95 +1.39 continued to target prices at the same level as in Decem- Lithuania 5.31 2.78 +2.54 Reny 0.00 0.00 nc ber. These prices have curbed Baltic buyers’ ability to bid Moldova 0.23 0.00 +0.23 Odessa 0.00 0.00 nc at more competitive prices for supplies from producers like Mongolia 0.00 0.16 -0.16 Temryuk 0.00 3.34 -3.34 Romania 0.35 0.27 +0.08 Rosneft. Poland 0.73 1.19 -0.46 River Baltic buyers secured a larger volume of supplies in Georgia 0.00 0.18 -0.18 Volgograd 0.00 0.00 nc December-January, when demand in Russia and Ukraine was Tajikistan 0.38 0.79 -0.41 more muted. These supplies triggered a rise in shipments Turkmenistan 0.12 0.36 -0.25 Far East from Baltic ports over the last two months. These came to Ukraine 17.77 14.59 +3.18 Nakhodka 4.54 6.21 -1.67 close to 90,000t in December-January combined. The vol- Uzbekistan 1.09 1.84 -0.74 ume compared with around 99,700t of shipments in the four Total Russia rail, river exports 121.94 114.81 +7.13 months to November. Russian base oil, lubes rail/river exports by supplier ‘000t A 3,200t cargo was loaded on the vessel Amaranth at Jan Dec ± Jan Dec ± the Latvian port of Riga at the end of January. The cargo was bound for Dordrecht. A major Russian producer loaded Volgograd 33.92 20.43 +13.49 Yaroslavl 5.69 4.83 +0.86 by rail 33.92 20.43 +13.49 Ufa 3.72 3.88 -0.16 a 6,000t cargo on the vessel Pacific at its Svetly terminal in by river 0.00 0.00 nc Orgkhim 5.34 7.03 -1.69 Kaliningrad on 4 February. The vessel was heading for Rot- N.Novgorod 0.00 0.00 nc Obninsk 0.53 1.24 -0.71 terdam. Perm 30.30 30.48 -0.18 Sofrino 0.01 0.08 -0.07 Buyers were seeking additional supplies. But activity was Novokuibyshevsk 15.76 12.82 +2.94 Orenburg 0.00 0.00 nc more muted in the cpt Posin market amid a slowdown in Angarsk 7.28 7.97 -0.69 Omsk 5.71 8.14 -2.44 offers. Nizhnekamsk 10.04 11.70 -1.66 Other 3.64 6.21 -2.57 Total 121.94 114.81 +7.13

Russia and FSU

Gazpromneft offered its February-loading supplies from Russian and Belarusian base oil export duty * $/t the Omsk and Yaroslavl refineries. The offer volume was Feb 2020 Jan 2020 Dec 2019 Nov 2019 Oct 2019 Sep 2019 small. The producer was instead building stocks and covering 23.50 23.10 27.10 26.40 26.10 27.20 its own downstream requirements ahead of maintenance on Aug 2019 Jul 2019 Jun 2019 May 2019 Apr 2019 Mar 2019 the base oil unit at its Omsk plant from late February. 28.20 30.00 33.10 31.30 29.20 27.30 The company offered just 700-800t of bright stock from * tax paid by producer for base oils export outside of Russia, Belarus, Kazakh- the refinery. The grade was sold out at around $520-550/t on stan, Tajikistan and Kyrgyzstan a cpt Posin border basis. The price was $20-30/t higher than the January levels for its bright stock supplies. Ufa refinery base oil offers and trades, 31 Jan-06 Feb Volume Export Volume Total rail exports of 5,700t from the Omsk plant in Janu- Price, fca Price, fca Grade offered price, fca sold, (Rub/t) * ($/t) * ary were down by almost 2,500t from December. Only 1,300t (t) ($/t) ‡ (t) of this volume moved to the Baltic region. Around 2,800t I-12A 0 - - - - of the volume was shipped to Black Sea ports for export in I-20A 0 36,960 585 503 325 flexi-containers. I-40A 0 - - - - M-20 0 - - - - Yaroslavl plant to remain on line * prices include 18% VAT ‡ VAT excluded, export duty added — SPIMEX Gazpromneft confirmed that there would be no maintenance Baltic SN 150 vs VGO, vs domestic NWE $/t at the Yaroslavl refinery this month. The producer owns the plant jointly with Rosneft. The unit had previously been Premium to VGO 1.6% cif NWE expected to shut for maintenance later this month. Discount to fob domestic NWE Even with the plant operating normally, the producer 200 offered from the unit less than 1,000t of February supplies 150 of Group II+ and off-specification Group III products. The producer was focused instead on meeting demand in Russia’s 100 domestic market as well as its own internal requirements. Rosneft is expected to issue an additional tender in the 50 coming days for its unsold February supplies. It is expected to offer around 3,000t, comprising mostly of light-grade 0 products. The company already sold most of its February -50 supplies to Ukraine and to Russia’s domestic market. Baltic 15 Feb 19 14 Jun 19 11 Oct 19 7 Feb 20 buyers had targeted prices around $470-490/t cpt Posin for these supplies. The bids were $10-20/t higher than the Prices held firm in the Black Sea market. Spot supply previous month. But they only secured a limited volume of remained limited, with most cargo volumes committed to Rosneft’s supplies. term contracts. Recent spot shipments have mostly been of flexibag supplies. Demand was firmer in markets like the Belarus unit remains off line Mideast Gulf, Africa and India. There remained a dearth of base oil supplies available from Prices remained low in the cpt Naushki market. Chinese Naftan’s Belarus refinery, one of the key suppliers to the Bal- lube demand has slowed because of travel and work restric- tic region. Ongoing issues with crude shipments from Russia tions in the country to curb the spread of the coronavirus to Belarus have cut feedstock supplies and forced refiner- outbreak. But demand for imported base oils has held steady ies in the country to reduce their run rates. With base oils after Chinese base oil producers slashed their run rates in output slashed, the Naftan refinery was focusing on covering response to the expected drop in demand. domestic requirements. Rosneft has yet to offer its unsold February-loading The presidents of Belarus and Russia were scheduled to volumes from the Angarsk refinery. Chinese buyers secured meet on 7 February. Even if an agreement is reached and around 1,000t of supplies in its main tender for February feedstock deliveries resume, the Naftan refinery expects supplies. that it will be able to start base oil export shipments only The Argus Russian diesel index edged down to 48,538 from March at the earliest. roubles/t ($768/t). Prices in Russia’s domestic fuel market were pressured by the lower profitability of product exports.

Russia and FSU

Baltic loadings t Russian domestic lube/base oil supplies ‘000t Port/terminal Vessel Next port Volume B/L Date Supplier Jan 20 ± Dec 19

Svetly Pacific Rotterdam 6,000 4 Feb Lukoil Volgograd 6.95 -3.11 Riga Amaranth Dordrecht 3,200 29 Jan Rosneft Novokuibyshevsk 17.03 -1.26 Svetly Nordstraum Rotterdam 7,000 26 Jan Bashneft Ufa 6.94 -1.65 Lukoil Perm 6.02 -0.20 Svetly ChemicalDistributr Dordrecht 7,000 24 Jan Rosneft Angarsk 12.83 1.83 Liepaja Key Marin Hull 3,000 17 Jan Gazpromneft Omsk 13.06 -0.82 Riga Rekon Hull 4,950 12 Jan Gazpromneft/Rosneft Yaroslavl 9.48 0.05 Riga Aleyna Mercan Eastham 3,500 4 Jan Orgkhim 3.15 -0.36 Vtspils/Lpaja Kirkeholmen WAF 13,500 31 Dec Tatneft Nizhnekamsk 6.89 -1.03 Svetly Alangova Gebze 10,000 27 Dec Rosa-1 0.72 0.54 Svetly Cimil Antwerp 4,000 24 Dec Lukoil Tyumen 0.65 -0.21 Riga Smeraldo Dordrecht 7,000 23 Dec Shaumyan lube plant 0.00 0.00 Devon Group 0.18 0.12 Riga Lagertha WAF 8,000 11 Dec Sofrino lube plant 0.06 0.06 Svetly CarolineEssberger Rotterdam 7,000 8 Dec Rosneft Ryazan 0.00 0.00 Svetly Amethyst Hull 3,500 5 Dec Experimental plant Neftekhim 0.06 0.00 Obninskorgsintez 0.00 0.00 Others 49.39 -0.31 TOTAL 133.40 -6.35

FSU key producers’ SN 500 price (netback) * $/t

Perm Kara Sea $/t Norway Barents Sea To Baltic Sea 403 Yenisei To Black Sea 399 SWEDEN To Naushki 252

White Sea

Ob Omsk $/t Onega Severnaya Dvina Ufa $/t

Yenisei To Baltic Sea 381 To Baltic Sea 400 FINLAND To Black Sea 383 Refinery To Black Sea 407 Helsinki RUSSIA City/town To Naushki 279 St Petersburg Ob To Naushki 253 Tallinn Port ESTONIA Perm Angara Yaroslavl LATVIA Kama Tobol Riga Nizhny Liepaja Novopolotsk Novgorod Lithuania Moscow Oka Omsk Yenisei Vilnius Kaliningrad Ufa Angarsk $/t Minsk Volgograd $/t BELARUS Dnepr Ishim Novokuibyshevsk Lake To Baltic Sea 330 Warsaw To BalticIrtysh Sea 407 Astana Baikal POLAND Orsk Don To Black Sea 334 Kiev Ural Sakhalin To Black Sea 436 Amur KAZAKHSTAN Island UKRAINE Kremenchug Volga Dnestr Dnepr Volgograd To Naushki 327 MOLDOVA To Naushki 220 HUNGARY Nikolaev MONGOLIA Odessa Azov ROMANIA Reni Sea CROATIA Kavkaz Caspian Aral Constanta Feodosiya Novorossiysk Sea Sea BOSNIA Danube Bishkek SERBIA Black Sea UZBEKISTAN BULGARIA GEORGIA Tbilisi KYRGYZSTAN MACEDONIA AZERBAIJAN ALBANIA ARMENIA Turkmenbashi Tashkent Fergana TURKEY Baku Ankara Yerevan TURKMENISTAN GREECE Dushanbe Ashkhabad TAJIKISTAN Sea of Japan

JAPAN CHINA SYRIA Tehran Mediterranean Sea IRAQ AFGHANISTAN * price calculated by subtracting transportBaghdad costs andIRAN taxes between the producer and the fob Baltic, fob Black Sea and cpt Naushki pricing point.

PAKISTAN

LIBYA EGYPT SAUDI ARABIA INDIA

Producers hold firm on price increases Argus USGC domestic prices Buyers push back ahead of finished lube price increases $/USG $/t Low Mid High ± Low Mid High ± Base oil margins climb to highest levels since 2018 Group I SN 150 2.18 2.26 2.34 +0.03 661 685.00 709 +9.50 US base oils prices are mostly higher, supported by balanced SN 500 2.30 2.38 2.46 +0.02 685 709.00 733 +6.00 Bright stock 3.26 3.34 3.42 +0.03 958 981.50 1,005 +8.00 supplies and steady domestic demand. Group II A couple of Group III producers have raised their posted N100 2.14 2.22 2.30 +0.02 663 688.00 713 +6.00 prices this week following a round of Group II and Group I N220 2.16 2.24 2.32 +0.02 659 683.50 708 +6.00 posting increases last month. N600 2.26 2.34 2.42 +0.04 678 702.00 726 +12.00 SK Lubricants raised its Group II+ and Group III prices by Group III $0.20/USG with effect from 3 February. 4cst 2.64 2.72 2.80 nc 832 857.0 0 882 nc Petro-Canada also raised its Group II+ and Group III 6cst 2.66 2.74 2.82 nc 838 863.00 888 nc 8cst 2.66 2.74 2.82 nc 838 863.00 888 nc prices by $0.20/USG effective from 5 February. Volume: 50t minimum The new prices are reflected in the Argus Americas Base Oils Posted Prices table. Argus USGC Group I bulk export prices Buyers resist price increases $/USG $/t Low Mid High ± Low Mid High ± Buyers have continued to resist the producer posted price increases because of lower feedstocks costs. Some buyers SN 150 fob 1.97 2.05 2.13 +0.02 597 621.00 645 +6.00 SN 500 fob 2.07 2.15 2.23 +0.02 617 641.00 665 +6.00 are taking the minimum volume required in their contracts. Bright stock fob 2.78 2.86 2.94 +0.03 817 840.50 864 +8.00 Others are delaying orders because they expect prices to Volume: 1,000t minimum fall in the coming weeks. Most producers are holding firm on their implementation Argus USGC Group II bulk export prices of price increases. Some price hikes have been smaller than $/USG $/t the announced increases. But most producers have raised Low Mid High ± Low Mid High ±

their prices by $0.20-0.30/USG. Producers have also raised N100 fob 1.97 2.05 2.13 +0.03 611 635.50 660 +9.50 their domestic and export spot prices by around $0.20/USG. N220 fob 1.97 2.05 2.13 +0.03 601 625.50 650 +9.00 The move by several key and independent blenders to N600 fob 2.02 2.10 2.18 +0.03 606 630.00 654 +9.00 raise their finished lubricant prices later this month and in Volume: 1,000t minimum March helps to keep the base oils price increases in place. Argus USGC naphthenic domestic prices More balanced supply-demand dynamics than usual for $/USG $/t this time of year are supporting the price increases, despite Low Mid High ± Low Mid High ± weaker feedstocks and competing fuels prices. Crude prices have extended their fall this week, dipping Pale oil 60 2.68 2.76 2.84 nc 794 817.50 841 nc Pale oil 100 2.77 2.85 2.93 nc 812 835.50 859 nc to their lowest levels since late December 2018. Pale oil 500 2.82 2.90 2.98 +0.03 810 833.00 856 +8.00 The recent drop in feedstocks prices has helped lift base Pale oil 2000 2.78 2.86 2.94 +0.01 793 816.00 839 +3.00 oils margins to their highest levels since early to mid-2018. Volume: 20t minimum The Argus domestic spot US Group II N100 premium to four-week average low-sulphur vacuum gasoil (VGO) rose Argus USGC naphthenic bulk export prices to $0.60/USG, its highest since June 2018. The premium is $/USG $/t $0.13/USG higher than year-earlier levels. The weekly price Low Mid High ± Low Mid High ± for low-sulphur VGO on the US Gulf coast (USGC) fell to Pale oil 60 fob 2.23 2.31 2.39 nc 661 684.50 708 nc $1.49/USG, its lowest level since last January. The low- Pale oil 100 fob 2.27 2.36 2.44 nc 665 690.00 715 nc sulphur VGO price is at a $0.01/USG premium to high-sulphur Pale oil 500 fob 2.24 2.32 2.40 nc 644 667.0 0 690 nc Pale oil 2000 fob 2.25 2.33 2.41 nc 642 665.00 688 nc VGO in the USGC. Volume: 1,000t minimum

The Argus domestic spot US Group II N100 premium to Pemex Salamanca prices four-week average diesel rose to $0.57/USG, its highest MXN/t * $/t $/USG level since March 2018. The premium is $0.37/USG higher Price ± Price ± Price ± than year-earlier levels. The weekly average price for USGC Group I SN 100 16,446.34 -75.85 881.03 +1.17 2.86 nc diesel fell to $1.54/USG, its lowest level since July 2017. The SN 150 16,180.09 -74.67 866.77 +1.16 2.82 nc diesel premium to Light Louisiana Sweet crude prices held SN 250 16,138.02 -74.47 864.52 +1.16 2.84 nc at $0.25/USG, its lowest level since June 2017. USGC diesel SN 500 16,758.11 -77.37 897.74 +1.20 2.97 nc prices flipped back to a premium to low-sulphur VGO prices SN 650 18,057.76 -83.37 967.36 +1.29 3.25 +0.01 Bright stock 23,318.29 -107.90 1,249.17 +1.66 4.21 +0.01 this week. * prices in Mexican peso/t effective from 01 Feb Higher base oils margins have increased the attraction Feedstocks for refiners to produce more base oils. $/USG $/bl Price ± Price ± Firmer fundamentals support prices Nymex WTI crude front month 1.21 -0.03 50.95 -1.19 Group II prices continue to rise amid limited spot supplies Argus Sour Crude Index (ASCI™) 1.24 -0.02 51.93 -1.08 and manageable surpluses. A key USGC refinery is in the USGC low sulphur VGO 0.5% cargo 1.49 -0.09 62.45 -3.82 middle of a planned turnaround. The scheduled maintenance USGC high sulphur VGO 2% cargo 1.48 -0.10 62.20 -4.07 is expected to last nearly 30 days. The producer has no Feedstocks premiums spot supplies available during the turnaround. The producer $/USG $/bl is not likely to have spot supplies until late March or early Price ± Price ±

April. SN 500 premium to WTI 0.94 +0.05 39.39 +2.03 Another key USGC producer will not have any spot sup- SN 500 premium to ASCI™ 0.91 +0.04 38.41 +1.92 plies until early to mid-March. Another key producer in the SN 500 premium to VGO 2% 0.67 +0.12 28.14 +4.91 region has some surplus supplies available on a spot basis. Oil products The producer has some mid- and heavy-viscosity supplies. $/USG $/bl But the producer is not willing to offer discounts on these Price ± Price ± supplies. NYH heating oil barge 1.57 +0.03 65.85 +0.98 Re-refined Group II supplies remain more balanced USGC 10ppm diesel 62 cargo 1.60 +0.03 67.33 +1.41 because of recent and upcoming maintenance. A couple of Oil products premiums re-refineries completed short turnarounds last week. This $/USG $/bl has helped curb excess production. Another re-refinery will Price ± Price ± have planned maintenance later this month. Heating oil premium to WTI 0.35 +0.05 14.90 +2.17 Heating oil premium to VGO 2% 0.09 +0.13 3.65 +5.05 Group I faces more resistance SN 500 premium to heating oil 0.58 -0.01 24.49 -0.13 Group I prices have also risen even as buyers have pushed US SN 500 forward prices $/USG $/t back against these increases. Low High ± Low High ±

Some buyers have noted the already-high premium of Group Mar 2020 2.13 2.18 +0.02 633.25 648.15 +5.50 I base oil prices over Group II. They also noted the lack of Apr 2020 2.12 2.17 +0.02 633.00 6 47.90 +6.55 any planned Group I maintenance to support strong supply- May 2020 2.12 2.17 na 632.85 6 47.75 na 2Q 2020 2.12 2.17 +0.02 633.00 6 47.90 +7.75 demand dynamics. Group I supplies should be more plentiful 3Q 2020 2.13 2.18 +0.04 634.45 649.35 +10.75 now that inventories have been rebuilt following planned The price shows the implied forward-curve base oil price required to maintain its existing profit margin relative to Nymex heating oil futures. maintenance at a couple of refineries in the fourth quarter. Refer to www.argusmedia.com for methodology A few Group I producers will have some spot supplies US SN 500 forward premium to heating oil available this month. But producers with alternative outlets $/USG $/t for their base oils are continuing to assess the market to de- Midpoint ± Midpoint ± termine if they should offer the supplies in the spot market Mar 2020 0.37 +0.11 111.70 +35.25 or place them in other outlets. Apr 2020 0.38 +0.12 112.00 +34.20 May 2020 0.38 na 112.15 na 2Q 2020 0.38 +0.11 113.25 +32.80 3Q 2020 0.37 +0.10 110.25 +29.80 The premium shows the implied forward-curve profitability of fob US export SN 500 relative to Nymex heating oil futures. Refer to www.argusmedia.com for methodology

More limited spot supplies and higher prices have damp- Naphthenic base oils ened demand to move large cargoes from the USGC. US suppliers have continued to tap regular export outlets in Latin Prices of US naphthenic base oils are steady to firm, sup- America. Prices in the region for Group II and to a lesser ported by balanced supplies ahead of, and during, mainte- extent Group I base oils have started to rise. Flexibag vol- nance at several refineries. umes of lower-priced Group I supplies from Europe continue A refinery is in the middle of a two-week planned turn- to flow to the region. The flow of Russian Group I supplies around. Another key refinery will have a nearly month-long has slowed because of more limited availability amid a round turnaround from early March. A second key refinery will un- of maintenance in the region. dergo planned maintenance. These producers have no spot supplies available ahead of, and during, their turnarounds. Group III prices hold steady Excess supplies of light viscosity pale oils are limited. Group III prices remain unchanged despite the recent pro- Some producers have reported tight availability for the pale ducer posted price increases. Supplies of the premium-grade 60 and pale 100. Heavy-grade naphthenics are also more bal- base oils remain readily available. anced than they have been since late 2018. Prices for some Group III supplies from the Mideast Gulf The more balanced supplies have bolstered domestic and are unlikely to increase. Some term contracts for these export prices for light and heavy grades since early January. supplies are linked to the Argus domestic spot US Group III A couple of producers had plans to raise prices in mid-Jan- prices, which remain unchanged. uary. But the persistent drop in crude prices has prompted Several vessel enquiries surfaced this week to move them to hold off raising prices. small 2,200-3,400t cargo volumes of premium-grade base Margins of naphthenic base oils have continued to oils from the USGC to Brazil in second-half February to early strengthen on the back of weaker crude prices, even March. without official price increases. The pale 60 premium to four-week average WTI crude rose to $61.54/bl, its highest Buyers seek more light grades level since late August. The pale 60 premium to four-week Demand remains firm in Mexico for mostly paraffinic light- average Light Louisiana Sweet and Brent crude prices rose to grade base oils to blend with diesel. $57.66/bl and $55.61/bl respectively. These are their highest The Mexican finance ministry increased its base tax on levels since early September. diesel imports by 3pc to $1.09/USG for 2020. It has also removed deductions on its diesel import tax. All diesel im- Vessel enquiries: Americas t ports from 24 January that have been subject to the import Loading port Next port B/L Date Volume tax have needed to pay an additional $1.09/USG in taxes. USGC Rio de Janeiro Feb 3,400 Even after the recent price increases, the cost of im- USGC Rio de Janeiro 1H Mar 3,000 porting light-grade base oils remains well below the cost of USGC Santos Mar 2,200 importing diesel that is subject to the import tax. Light- Augusta USGC 16-18 Feb 4,000 grade base oils at Brownsville, Texas, continue to be offered at $2.17-2.30/USG. These prices are nearly $0.55-0.65/USG below the price of diesel that is subject to the import tax at Argus spot US Pale oil 60 premium to crude $/bl the US-Mexican border. Mexico's state-owned Pemex lowered its Group I posted Premium to WTI Premium to LLS Premium to Brent prices for January. It cut its prices for all grades by 0.5pc. 70 The price decrease contrasts with higher domestic and 65 export US Group I posted and spot prices. The Argus domestic spot prices for US Group I base oils have increased 60 by 3.9-6.1pc since early January. Crude prices have fallen by 55 17.6-18.8pc during the same period. 50

45 Crude front month = 0 40 15 Feb 19 14 Jun 19 11 Oct 19 7 Feb 20

AMERICAS Posted Prices $/USG

Group I * ExxonMobil Gulf coast HollyFrontier Paulsboro Refining east coast Calumet Shreveport Effective $/USG ± Effective $/USG ± Effective $/USG ± Effective $/USG ± 70/75 27 Jan 20 3.83 +0.20 100 24 Jan 20 3.84 +0.20 27 Jan 20 3.83 +0.20 29 Jan 20 4.09 +0.20 150 24 Jan 20 3.89 +0.20 27 Jan 20 4.01 +0.20 29 Jan 20 4.04 +0.20 250 27 Jan 20 3.87 +0.20 300/350 24 Jan 20 3.71 +0.20 500 27 Jan 20 4.62 +0.20 29 Jan 20 4.23 +0.20 600/650 24 Jan 20 4.09 +0.20 21 Jan 20 4.45 +0.25 700 29 Jan 20 4.26 +0.20 Bright stock 24 Jan 20 5.31 +0.20 27 Jan 20 5.34 +0.20 29 Jan 20 5.46 +0.20 24 Jan 20 5.49 +0.20

Group II * Excel Paralubes Gulf coast Chevron Gulf coast Motiva Gulf coast Effective $/USG ± Effective $/USG ± Effective $/USG ± 70 16 Jan 20 3.72 +0.30 80 16 Jan 20 3.72 +0.30 100/110 16 Jan 20 3.68 +0.30 14 Jan 20 3.69 +0.30 13 Jan 20 3.04 +0.30 220/225 16 Jan 20 3.68 +0.29 14 Jan 20 3.66 +0.27 13 Jan 20 3.11 +0.30 600 16 Jan 20 3.83 +0.25 14 Jan 20 3.84 +0.25 13 Jan 20 3.24 +0.30

Group II * ExxonMobil Gulf coast Calumet Shreveport Petro-Canada Mississauga SK Lubricants Gulf coast Effective $/USG ± Effective $/USG ± Effective $/USG ± Effective $/USG ± 70 17 Jan 20 3.60 +0.30 80 21 Jan 20 3.89 +0.30 100 21 Jan 20 3.76 +0.30 17 Jan 20 3.59 +0.30 150 21 Jan 20 4.19 +0.30 200/220 24 Jan 20 3.91 +0.20 17 Jan 20 3.60 +0.30 325 21 Jan 20 4.45 +0.25 350 17 Jan 20 3.88 +0.25 650 17 Jan 20 4.10 +0.25 Bright stock 27 Jan 20 5.49 +0.20

Group II+ * SK Lubricants Gulf coast Phillips 66 Gulf coast ExxonMobil Gulf coast Petro-Canada Mississauga Effective $/USG ± Effective $/USG ± Effective $/USG ± Effective $/USG ± 50/60 01 May 19 4.80 +0.25 65 05 Feb 20 5.18 +0.20 70/80 03 Feb 20 4.93 +0.20 01 May 19 4.81 +0.25 100 05 Feb 20 4.34 +0.20 110/130 24 Jan 20 4.34 +0.20

Group III * SK Lubricants Gulf coast Phillips 66 Gulf coast Motiva Gulf coast Petro-Canada Mississauga Effective $/USG ± Effective $/USG ± Effective $/USG ± Effective $/USG ± 4cst 03 Feb 20 5.25 +0.20 01 May 19 5.01 +0.25 13 Jan 20 3.55 +0.30 05 Feb 20 5.47 +0.20 6cst 03 Feb 20 5.35 +0.20 13 Jan 20 3.45 +0.30 05 Feb 20 5.47 +0.20 8cst 03 Feb 20 5.43 +0.20 01 May 19 5.19 +0.25 05 Feb 20 5.57 +0.20

Group II+ * Kleen Performance Products midcontinent and Canada northeast and eastern Canada west coast Effective $/USG ± Effective $/USG ± Effective $/USG ± 110/130 17 Jan 20 4.41 +0.30 17 Jan 20 4.46 +0.30 17 Jan 20 4.56 +0.30 240 17 Jan 20 4.56 +0.30 17 Jan 20 4.61 +0.30 17 Jan 20 4.71 +0.30

Avista Oil midwest/east coast * Effective $/USG ± Group II N150 17 Jan 20 4.20 +0.30 Group III 4cst 18 Mar 19 4.32 +0.10

* the ± column shows the price difference between the current and previous posted price.

AMERICAS Posted Prices $/t

Group I * ExxonMobil Gulf coast HollyFrontier Paulsboro Refining east coast Calumet Shreveport Effective $/t ± Effective $/t ± Effective $/t ± Effective $/t ± 70/75 27 Jan 20 1,187.30 +62.00 100 24 Jan 20 1,182.72 +61.60 27 Jan 20 1,179.64 +61.60 29 Jan 20 1,255.63 +61.40 150 24 Jan 20 1,194.23 +61.40 27 Jan 20 1,231.07 +61.40 29 Jan 20 1,220.08 +60.40 250 27 Jan 20 1,176.48 +60.80 300/350 24 Jan 20 1,124.13 +60.60 500 27 Jan 20 1,395.24 +60.40 29 Jan 20 1,269.00 +60.00 600/650 24 Jan 20 1,218.82 +59.60 21 Jan 20 1,326.10 +74.50 700 29 Jan 20 1,260.96 +59.20 Bright stock 24 Jan 20 1,577.07 +59.40 27 Jan 20 1,585.98 +59.40 29 Jan 20 1,616.16 +59.20 24 Jan 20 1,629.38 +59.36

Group II * Excel Paralubes Gulf coast Chevron Gulf coast Motiva Gulf coast Effective $/t ± Effective $/t ± Effective $/t ± 70 16 Jan 20 1,153.20 +93.00 80 16 Jan 20 1,145.76 +92.40 100/110 16 Jan 20 1,148.16 +93.60 14 Jan 20 1,140.21 +92.70 13 Jan 20 942.40 +93.00 220/225 16 Jan 20 1,129.76 +89.03 14 Jan 20 1,116.30 +82.35 13 Jan 20 948.55 +91.50 600 16 Jan 20 1,156.66 +75.50 14 Jan 20 1,157.76 +75.38 13 Jan 20 978.48 +90.60

Group II * ExxonMobil Gulf coast Calumet Shreveport Petro-Canada Mississauga SK Lubricants Gulf coast Effective $/t ± Effective $/t ± Effective $/t ± Effective $/t ± 70 17 Jan 20 1,116.00 +93.00 80 21 Jan 20 1,200.45 +92.58 100 21 Jan 20 1,155.30 +92.18 17 Jan 20 1,105.22 +92.36 150 21 Jan 20 1,283.65 +91.91 200/220 24 Jan 20 1,192.55 +61.00 17 Jan 20 1,099.44 +91.62 325 21 Jan 20 1,355.78 +76.17 350 17 Jan 20 1,176.77 +75.82 650 17 Jan 20 1,244.96 +75.91 Bright stock 27 Jan 20 1,653.04 +60.22

Group II+ * SK Lubricants Gulf coast Phillips 66 Gulf coast ExxonMobil Gulf coast Petro-Canada Mississauga Effective $/t ± Effective $/t ± Effective $/t ± Effective $/t ± 50/60 01 May 19 1,548.00 +80.62 65 05 Feb 20 1,642.06 +63.40 70/80 03 Feb 20 1,552.95 +63.00 01 May 19 1,539.20 +80.00 100 05 Feb 20 1,364.89 +62.90 110/130 24 Jan 20 1,358.42 +62.60

Group III * SK Lubricants Gulf coast Phillips 66 Gulf coast Motiva Gulf coast Petro-Canada Mississauga Effective $/t ± Effective $/t ± Effective $/t ± Effective $/t ± 4cst 03 Feb 20 1,653.75 +63.00 01 May 19 1,590.67 +79.38 13 Jan 20 1,125.14 +95.08 05 Feb 20 1,718.18 +62.82 6cst 03 Feb 20 1,685.25 +63.00 13 Jan 20 1,079.85 +93.90 05 Feb 20 1,722.28 +62.97 8cst 03 Feb 20 1,710.45 +63.00 01 May 19 1,624.47 +78.25 05 Feb 20 1,737.23 +62.38

Group II+ * Kleen Performance Products midcontinent and Canada northeast and eastern Canada west coast Effective $/t ± Effective $/t ± Effective $/t ± 110/130 17 Jan 20 1,374.60 +93.51 17 Jan 20 1,390.18 +93.51 17 Jan 20 1,421.35 +93.51 240 17 Jan 20 1,413.14 +92.97 17 Jan 20 1,428.64 +92.97 17 Jan 20 1,459.63 +92.97

Avista Oil midwest/east coast * Effective $/t ± Group II N150 17 Jan 20 1,306.96 +93.35 Group III 4cst 18 Mar 19 1,358.51 +31.45

* the ± column shows the price difference between the current and previous posted price. The $/t price is converted from the $/USG price. Refer to www.argusmedia.com for methodology with the gallons-to-tonnes conversion factors.

Market News and Analysis

EGPC restarts Alexandria specialty units Several other independent refiners and state-controlled Egyptian state-owned EGPC has restarted bitumen, base producers have also trimmed run rates. Some of them ex- oils and paraffin wax production at its 115,000 b/d El-Mex pect to halt operations in the coming weeks. refinery in Alexandria, ending a shutdown that lasted more China's base oils demand is expected to fall over the than two years. next few weeks because of the impact from the coronavi- The refinery's speciality products units were shut in rus outbreak on economic activity and lube consumption. October 2017 for revamp and maintenance work that had But the pre-emptive moves by producers to trim run rates been scheduled to last one year, but repeated delays were are expected to support supply-demand fundamentals that followed by indications from EGPC in December that the are already relatively firm. Buyers and many producers had units would remain shut until the middle of 2020. already been holding unusually low stocks before the lunar But production resumed two weeks ago, with bitumen new year holidays. They had planned to replenish their in- output running at 1,000 t/day since last week, causing delays ventories after the holidays, at a time of year when demand to bitumen import cargo discharge operations by incoming typically peaks. tankers as refinery flows filled up EGPC's on-shore storage tanks at Alexandria. China’s December base oil imports slip Production levels for base oils and paraffin wax have not China's base oil imports dipped in December from November yet been disclosed. as buyers sought to manage inventories ahead of the the EGPC's February bitumen import tender for seven car- lunar new year holiday. goes of 4,000-7,000t of pen 60/70 have been impacted by But imports rose from a year earlier, and for an eighth the unexpected refinery restart, with one cargo negotiated month in nine, amid sustained buying interest for supplies between EGPC and supplier BB Energy for deferred delivery labelled as base oils. Greater in shipments also bolstered in March. EGPC was considering its approach to a potential annual imports for the first time in three years. March import tender. Total base oil imports of 201,020t in December fell by 12pc from 227,390t in November. But the volume was still China’s independent base oil plants cut runs up 1.2pc from December 2018. Total imports of 2.69mn t in A growing number of independent base oil producers in 2019 rose by 3.5pc from 2.60mn t in 2018. northeast China have cut operating rates and prices, fearing Base oil imports rose last year even as the start-up of a slower demand will trigger a rise in inventories. Some of swathe of new plants in China boosted the country's produc- them are contemplating full shutdowns. tion capacity by more than 2.5mn t. Low prices and tighter The producers cut output in a bid to curb the prospect margins then prompted some producers to operate at low of rising inventories in response to an expected slowdown run rates. Some producers were also tweaking operations to in demand. Transport restrictions are curbing fuel demand. stabilise the quality and specifications of the new supplies. Lunar new year holidays in China have been extended in Most producers also sold their supplies as white oils many cities and provinces to 9 February in the wake of the rather than base oils. Categorising their supplies as white coronavirus outbreak. Many companies are facing staffing oils enabled them to avoid paying China's consumption tax of issues with many employees required to stay or work from 1,711.52 yuan/t ($244/t). home. Buyers requiring supplies categorised as base oils had to Shandong independent refiner Xintai Petrochemical has continue to cover those requirements with shipments from slashed run rates at its 200,000 t/yr Group II base oils plant regional producers. by 50pc to prevent a build-up of inventories. Regional rival Henrnd Petrochemical has cut output at its 150,000 t/yr South Korea’s December base oil exports fall base oils unit by about 30pc. South Korea's base oil exports fell back in December after a The producers also cut their base oil prices. But the rise in shipments the previous month, which left producers 50-200 yuan/t ($7-29/t) size of the cut was smaller than the with a smaller than usual surplus to clear at the end of the drop in crude prices. year. Panjin Northern Asphalt trimmed operating rates at its Exports of 381,220t in December fell by 11pc from 400,000 t/yr base oil unit by 20pc. The producer in Liaoning 429,050t the previous month, according to trade organisation province in northeast China also cut its base oil price offers Kita. The drop in shipments left total exports of 4.66mn t in by Yn200-250/t in response to lower crude prices and muted 2019 down by 0.2pc from 4.67mn t the previous year. buying interest.

Market News and Analysis

Exports edged down in 2019 even amid a lighter round Rising volumes in China helped to offset weakness in of plant maintenance compared with the previous year. Latin America. Volume growth in its Europe Middle East Production capacity was also higher than in 2018 when a Africa (EMEA) segment was driven by the acquisition of a refiner added additional capacity during the third quarter of manufacturing facility in Eastern Europe in February 2019. that year. Sales from the company's Quick Lubes segment rose by The lower export volume instead reflected the impact of 12pc to 7.3mn USG, up from 6.5mn USG a year earlier. But increasingly widespread and prolonged plant run cuts. Refin- gross profit margin edged down to 37.3pc, from 38.4pc a ers implemented these cuts in response to growing market year earlier. Sales got a boost from the addition of 106 net oversupply that resulted in increasingly squeezed base oil new stores. Profitability was impacted by the opening of margins. newly-built stores and higher labour costs. Weaker Chinese demand exacerbated the oversupply, "We expect profitability in Quick Lubes to improve and especially in the second and third quarters of the year. But volume growth in International to continue," chief executive a round of stocks replenishment helped to boost Chinese Sam Mitchell said in an earnings report. demand in the fourth quarter of the year. The broad increase in US base oils prices so far this year South Korean base oil exports to China fell back to has been factored into the company's outlook. The increase 87,500t in December, down from 101,340t the previous is not anticipated to be a drag on performance, as price month. But the volume was still the second-highest level increases will be passed on to end users. Most competitors since last May. have also raised prices on finished lube products. A steady flow of supplies to other key markets like Japan left total exports to northeast Asia at 116,960t in December. China’s base oil demand holds firm The volume was down by 10pc from the previous month. But Chinese demand for base oils remains firmer than expected the volume rose to a 31pc share of South Korea's total base as blenders and distributors move to replenish unusually low oil exports. This was its highest level since March. stocks. The higher share of shipments to outlets within the re- "There is no slowdown in bids," said a distributor in gion curbed the pressure on refiners to target more distant northeast China. "Chinese refiners' inventories are very low. markets with more supplies. Our inventories are low." The distributor this week sold around 1,000t of heavy- Valvoline’s 1Q profit rises grade base oils to a major blender in the region. It has also US lubricants manufacturer Valvoline expects profitability continued to replenish its stocks. But these moves remain for 2020 to exceed its earlier expectations after profit rose more cautious, same as before the lunar new year holiday, strongly in the three months to end-December. to avoid any significant stockbuild. Valvoline reported $73mn profit for its fiscal first quarter, Chinese base oil demand typically rises after the lunar ended in December, up 38pc from $53mn a year earlier. new year holiday as blenders replenish stocks in prepara- Sales rose by 9pc to $607mn. tion for the spring oil-change season. This wave of stock Lubricant sales volumes rose by 3pc to 43.4mn USG dur- replenishment was expected to be stronger this year after ing the quarter, up from 42mn USG in the same year-earlier buyers, distributors and refiners trimmed their inventories quarter. to unusually low levels before the lunar new year holiday in Lube sales volumes in Core North America edged down second-half January. 1pc to 21.4mn USG. But gross profit margin for these supplies This pick-up in demand is now likely to be slower amid jumped to 36.3pc, from 31.7pc during the same period a expectations that travel restrictions and a drop in factory year earlier. The stronger profitability reflected growth in its activity will impact finished lubricant consumption. China branded volume sales in the retail channel. has imposed widespread travel restrictions in a bid to con- Synthetic oils made up nearly 50pc share of this category tain the spread of the coronavirus outbreak. by volume. New passenger cars requiring synthetic motor Buyers were instead expected to continue to procure oils will continue to push the shift towards higher-grade supplies on a need-to basis, as they did before the lunar new lubricants. year holiday. International lube sales volumes rose 7pc to 14.7mn USG While buyers remain cautious, the country's refiners have during the three-month period, up from 13.8mn USG the slashed run rates in response to the drop in fuel demand year prior. Gross profit margin for these volumes rose to caused by the virus outbreak. 28.7pc, up from 27.2pc a year earlier.

Market News and Analysis

China's largest refiner by capacity, state-controlled Shipments of premium-grade base oils from South Korea Sinopec, will cut run rates by around 10-12pc this month, or dropped in November to a four-month low of 2,020t. But around 600,000 b/d. The country's second-largest refiner, imports of 32,000t from the country in the first 11 months PetroChina, is considering reducing throughput. of 2019 rose by 10pc from 29,060t over the same period in Several independent base oil producers have already cut 2018. their run rates by 20-50pc in anticipation of a slowdown in Imports from Qatar came to 2,000t in November and demand. Any significant slowdown has so far yet to materi- 11,610t in the first 11 months of the year. The volume was alise. up by 34pc from 8,650t during the same 11-month period in "We are still moving base oils shipments steadily to buy- 2018. ers," said an official from an independent refinery, adding But imports of Group III base oils from Bahrain fell to "we are not affected." 14,890t in the first 11 months of 2019, down by 7pc from the same period in 2018. Brazil’s base oil imports fall in November Shipments of naphthenic base oils from Sweden fell in Brazil's base oil imports held firm in November on the back November to a five-month low of 980t, down from 3,160t the of a further rise in shipments from the US. previous month. Imports of 17,340t in the first 11 months of Base oil imports of 51,805t in November were down the year increased by 21pc from 14,340t during the same from 56,643 in October. But the volume was still the second period in 2018. Shipments rose even as a key producer in the highest in the first 11 months of 2019 and up by 68pc from country faced increased financial and logistical difficulties 30,900t in November 2018. from US sanctions on Venezuelan-owned assets. Even with the pick-up in imports in October-November, total imports of 476,810t in the first 11 months of the year Brazil’s October lube demand falls were still down by 8pc from 516,310t during the same period Brazil's finished lubricant demand fell in October to a four- in 2018. month low as sales slowed for greases, automotive engine Imports of mostly Group II base oils from the US rose oils and industrial lubricants. in November to a five-month high of 44,630t. The increase Lube consumption of 87,900 kl (77,850 t) in October fell coincided with moves by US producers to clear their invento- by 16pc from a three-year high of 104,070 kl in September, ries through a large number of outlets before the end of the according to Brazil's fuel association data. Lube demand fell year. slightly from 88,560 kl in October 2018. Imports of 353,540t from the US in the first 11 months Lube sales of 901,480 kl in the first 10 months of 2019 of the year fell by 10pc from the same period in 2018. The were down by 1pc from 911,270 during the same period in supplies accounted for 74pc of Brazil's total base oil imports, 2018. down slightly from a 76pc share during the same period of Gasoline and ethanol engine oil sales of 26,830 kl fell by 2018. 19pc in October from the previous month. Diesel engine oil Brazil's remaining shipments in November consisted sales fell by 18pc in October to 24,700 kl. Sales of industrial mostly of Group III base oils from Asia and the Mideast Gulf lubricants fell by 12pc in October to 19,525 kl. and naphthenics base oils from Europe.

Brazilian lube oil imports ’000 bl

800

700

600

500

400

300

200

100 Dec 16 Dec 17 Dec 18 Dec 19

MaIntenance and shutdowns

Upcoming / recent base oil plant maintenance / shutdowns / closures Refiner Location Timing Capacity Capacity affected Cause

Total Gonfreville, France 2021 240,000 t/yr All Maintenance SK-Repsol Cartagena, Spain Q4 2020 for 45 days 630,000 t/yr All Maintenance Cosmo Yokkaichi, Japan Q3 2020 for 2 months 175,000 t/yr All Maintenance JXTG Negishi, Japan Mid-Sep to end-Oct 2020 210,000 t/yr All Maintenance Naftan Novopolotsk, Belarus Late-Aug 2020 for 3 weeks 200,000 t/yr All Maintenance Rosneft Angarsk, Russia Late-Aug 2020 for 2 weeks 250,000 t/yr All Maintenance S-Oil Onsan, South Korea 2H Aug 2020 for 1 month 41,000 b/d All, Group I/II Maintenance Formosa Mailiao, Taiwan 01 Jun to 10 Jul 2020 600,000 t/yr All, Group II Maintenance Neste Porvoo, Finland Q2 2020 250,000 t/yr All Group III Refinery maintenance JXTG Kainan, Japan May 2020 for 45 days 200,000 t/yr All Maintenance # Sapref Durban, South Africa May to Jun 2020 175,000 t/yr NA Maintenance Shell Bukom, Singapore 18 Apr to 27 May 2020 380,000 t/yr NA CDU maintenance # MOL Szazhalombatta, Hungary 01 Apr 2020 for 30 days 195,000 t/yr All Maintenance # Ergon Refining Vicksburg, Mississippi, US 05 Mar 2020 for 26 days 25,000 b/d NA Maintenance Vertex Columbus, Ohio, US End-Feb 2020 for 10 days 1,500 b/d All Maintenance Gazpromneft Omsk, Russia Mid-Feb to Apr 2020 230,000 t/yr All Maintenance Adnoc Abu Dhabi, UAE Mid-Feb to mid-Mar 2020 620,000 t/yr All Maintenance BPCL Mumbai, India Ely-Feb 2020 for 15 days 180,000 t/yr All Maintenance Rosneft/Gazpromneft Yaroslavl, Russia Feb to Apr 2020 350,000 t/yr All, Group I Maintenance Excel Paralubes Westlake, Louisiana, US Feb 2020 for at least 25 days 22,000 b/d All Maintenance San Joaquin Refining Bakersfield, California, US 01 Feb 2020 for 2 weeks 8,100 b/d NA Maintenance San Joaquin Refining Bakersfield, California, US 30 Jan 2020 for 2 weeks 8,100 b/d NA Maintenance HCC Indianapolis, Indiana, US Late-Jan 2020 for 3-4 days 2,500 b/d All Maintenance Naftan Novopolotsk, Belarus From ely-Jan 2020 200,000 t/yr Partial Run-cut Petrochina Dalian, China From Jan 2020 400,000 t/yr All, Group I Run-cut # Total Gonfreville, France From 14 Dec 2019 240,000 t/yr All Fire Calumet Shreveport, Louisiana, US Ely-Dec 2019 for 2-3 weeks 8,000 b/d Partial, Light/Mid Maintenance Avista Oil Peachtree, Georgia, US Ely-Dec 2019 for 6-8 days 1,600 b/d All Maintenance Cepsa San Roque, Spain Ely-Nov 2019 for 1 month 265,000 t/yr All Maintenance HCC Indianapolis, Indiana, US Ely-Nov 2019 for 2 weeks 2,500 b/d All Maintenance Tupras Izmir, Turkey Nov 2019 to Feb 2020 300,000 t/yr All Run-cut Sinopec Maoming, China Nov 2019 to 1H Jan 2020 700,000 t/yr Partial, All Grp I Maintenance Holly Frontier Tulsa, Oklahoma, US End-Oct to ely-Dec 2019 9,500 b/d All Maintenance Petronas Melaka, Malaysia 22 Oct to 12 Dec 2019 300,000 t/yr Partial Maintenance SK-Pertamina Dumai, Indonesia 1H Oct to mid-Nov 2019 505,000 t/yr Partial Maintenance IRPC Rayong, Thailand 18 Oct 2019 for 1 month 320,000 t/yr NA Refinery maintenance Calumet Shreveport, Louisiana, US Mid-Oct 2019 for 2-3 weeks 8,000 b/d Partial, Heavy Maintenance SK-Repsol Cartagena, Spain Mid-Oct 2019 for 10 days 630,000 t/yr NA Maintenance Pertamina Cilacap, Indonesia Ely-Oct to 18 Nov 2019 440,000 t/yr Partial, Group I Refinery maintenance Shanxi Lu'anTaihang Shanxi, China End-Sep 2019 for 1 month Up to 600,000 All, Group III+ CTL Maintenance Tupras Izmir, Turkey 24 Sep to mid-Oct 2019 300,000 t/yr All Maintenance Naftan Novopolotsk, Belarus From ely-Sep to Nov 2019 200,000 t/yr Partial; Full fr. Oct Maintenance IOC Haldia, India Sep-Dec 2019 260,000 t/yr Partial Refinery maintenance JXTG Mizushima A, Japan Ely-Sep to mid-Nov 2019 180,000 t/yr All Maintenance Repsol Cartagena, Spain 09 Sep 2019 for 15-20 days 135,000 t/yr All, Group I Maintenance Petrochina Daqing, China From 25 Aug 2019 450,000 t/yr All, Group II Refinery maintenance IOC Chennai, India Aug-Oct 2019 270,000 t/yr Partial Refinery maintenance JXTG Kainan, Japan From Aug 2019 200,000 t/yr Partial, SN 500 Lower production Every effort has been made to verify information directly with appropriate company sources. Some information has been obtained from usually reliable sources, but cannot be officially confirmed with the refinery concerned. The list will be updated when new information becomes available. #Additional/updated plant data over the past week

Market fundamentals

Nov 2019 Industrial overview Lube/base oils overview Automobile Industrial sales growth Production Sales Import Export ’000 Mom% Yoy% Yoy% ’000t Mom% Yoy% ’000t Mom% Yoy% ’000t Mom% Yoy% ’000t Mom% Yoy%

China 2,057 +7 -5 +6.20 † 227.4 +17 +15 1.1 -62 -80 Japan* 386 +23 -13 -8.20 184.4 +6 +3 142.3 +41 +4 22.3 +20 +6 73.3 +21 +59 Europe 1,176 0 +5 -1.30 US* 1,409 +5 +1 +1.10 675.2 -10 -8 451.8 -20 -11 90.8 -72 -44 408.5 +8 -9

France 173 -9 +1 +1.20 39.9 -14 -16 69.6 -24 -22 57.1 -20 -18 Germany 299 +5 +10 -4.00 27.3 -39 +48 83.7 -10 -5 55.5 +18 -6 20.4 -32 -14 Greece -8.30 12.7 +199 +97 17.1 -36 -36 Italy 151 -4 +2 -0.60 35.3 -5 +7 Netherlands -2.10 24.9 +7 -66 20.1 -33 +2 Portugal +0.30 4.3 +1 -12 11.3 -22 +33 Russia 157 +3 -6 87.6 -5 -14

Turkey 58 +19 0 +5.10 † 44.3 +92 +141 0.0 0 0 UK 157 +9 -1 -1.90 24.0 -20 -13 24.7 -30 -35 20.5 -38 -47

Australia* 85 +3 -10 0.0 0 0 24.8 -2 +3 33.1 -25 -18 1.4 -24 -93 Hong Kong 0.9 -98 -98 36.2 +67 -7 India 160 -8 -11 +1.80 63.0 -19 +6 325.0 +9 +11 270.1 +5 -9

South Korea -0.30 40.1 -20 +16 429.0 +31 +12 Taiwan* 41 -1 +13 +2.15 93.6^ -2 -1 27.5 -58 -40 Thailand* 79 +3 -16 -8.30 51.6 +14 +8 55.7† -23 +5 14.1 +70 -34

Argentina* 23 -16 -31 Brazil* 242 -4 +5 -2.60 47.8 +38 +9 † 64.9 -8 +55 7.6 -10 +58 Mexico* 3.7 -17 -44 99.6 +5 +14 0.0 0 +125,153 * The conversion factor used is 159 litres to a barrel and 7.1 barrels to a metric tonne. † Apparent demand. ‡ 4 weeks to end-month.

Global industrial growthYoy % Global lubricating oils demand ’000 t

US China Europe US Germany Brazil 10 800

600 5

400

0 200

-5 0 May 18 Nov 18 May 19 Nov 19 May 18 Nov 18 May 19 Nov 19

Sources: Country data for base oil and lube sales, production, imports and exports taken from national sources US: Energy Information Administration. Japan: Petroleum Association of Japan. Italy: Unione Petrolifera. Singapore: International Enterprise. Country data for industrial production growth taken from national sources. Automobile sales data taken from national automobile associations. US: Autodata Corp. Russia: Association of European Businesses in the Russian Federation. Australia: Federal Chamber of Automotive Industries. India: Society of Indian Automobile Manufacturers. Thailand: Toyota Motor Thailand.

Market fundamentals

Upcoming / recent expansions / conversions / new plants Refiner Location Timing New capacity Grade Expansion / New

IOC Haldia, India NA 270,000 t/yr Group III New Modrica refinery Modrica, Bosnia NA 200,000 t/yr Group III Expansion Saudi Aramco/Sabic Yanbu, Saudi Arabia 2025 NA NA New ExxonMobil Jurong, Singapore 2023 1mn t/yr Group II N150, N600, high-vis base oils New Hainan Handi Hainan, China 2022 300,000 t/yr Group II re-refinery New Gazpromneft Omsk, Russia 2021-2022 Up to 180,000 t/yr Group II/III 2cst, 4cst, 6cst and 8cst Expansion BPCL Mumbai, India 2021 450,000 t/yr Group II and Group III Expansion Shenghong Petrochemical Lianyungang, China 2021 620,000 t/yr Group II/III Cancelled Sasol Louisiana, US After 2020 NA GTL Cancelled SK-Repsol Cartagena, Spain After 2020 Up to 50pc higher Group III Expansion Tayras Selimiye, Turkey Oct 2020 40,000 t/yr Group II+ re-refinery New HILL Chimkent, Kazakhstan 2020 250,000 t/yr Group I/II/III New Hainan Handi Hainan, China 2020 1mn t/yr Group II+/III New Avista Oil Kalundborg, Denmark 2Q 2020 100,000 t/yr Group I+ re-refinery New Gen III Oil Corporation Bowden, Canada 2Q 2020 2,240 b/d 700 b/d Group II, 1,540 b/d Group III New Liaohe Petrochemical Liaoning, China 4Q 2019 400,000 t/yr Naphthenic base oils New Sinopec Jingmen, China End-Oct 2019 550,000 t/yr Group II heavy and white oils New Petrochina Karamay, China Oct 2019 30,000 t/yr each Naphthenic bright stock, rubber oil Expansion Neste California, US 3Q 2019 NA Group III Conversion ExxonMobil Jurong, Singapore 2Q 2019 100,000 t/yr Group II Expansion Hengli Petrochemical Dalian, China Apr 2019 600,000 t/yr Group II and III New ExxonMobil Rotterdam, Netherlands 1Q 2019 900,000 t/yr Group II New Puraglobe Tampa, US 1Q 2019 50,000 t/yr Group III New Henan Junheng Henan, China 1Q 2019 280,000 t/yr Group II New Lub-rref Bangladesh Ltd Chittagong, Bangladesh 1Q 2019 50,000 t/yr Group II N70, N150, N500/600 re-refinery New Shandong Qingyuan Shandong, China 1Q 2019 800,000 t/yr Group II+/III New Shandong Huanghe Shandong, China 1Q 2019 180,000 t/yr White oils and base oils, Group II New Shanxi Lu’an Taihang Shanxi, China 1Q 2019 Up to 600,000 t/yr Group III+ CTL, 2/3/4/8cst New Shida Changsheng Shandong, China Jan 2019 300,000 t/yr Group II New VN Oil Hiep Phuoc, Vietnam After 2018 50,000 t/yr Group II re-refinery Cancelled Liaoning Haihua Liaoning, China Dec 2018 300,000 t/yr Naphthenic/paraffinic base oils, Group II New Luberef Yanbu, Saudi Arabia End-Dec 2018 170,000 t/yr Group I bright stock Expansion Hyundai-Shell Daesan, South Korea 3Q 2018 200,000 t/yr Group II Expansion Pemex Salamanca, Mexico 2018 3,300 b/d Group II Delayed Holly Frontier Wood Cross, US 2018 10,000-12,000 b/d Group III Delayed Luberef Yanbu, Saudi Arabia 4Q 2017 715,000 t/yr Group II New Panjin Northern Asphalt Liaoning, China 2H Nov 2017 300,000 t/yr Naphthenic base oils New Slavneft Yaroslavl, Russia 2Q 2017 100,000 t/yr Group III New Petrobras Comperj, Brazil 2017 355,000 t/yr Group II Cancelled S-Oil Onsan, South Korea Dec 2016 200,000 t/yr Group II N500 Conversion CNOOC Taizhou, China Oct 2016 600,000 t/yr Group II New Ergon Refining Vicksburg, US 3Q 2016 3,000 b/d Group I bright stock New Shandong Qingyuan Shandong, China Jun 2016 600,000 t/yr Group II New Sinopec Maoming, China Jun 2016 400,000 t/yr Group II+, Group III Expansion Adnoc Abu Dhabi, UAE Apr 2016 620,000 t/yr 500,000 t/yr Group III, 120,000 t/yr Group II New Jinling Petrochemical Nanjing, China Mar 2016 200,000 t/yr Group II New ExxonMobil Jurong, Singapore 1Q 2015 300,000 t/yr Group II Expansion ExxonMobil Baytown, US 1Q 2015 300,000 t/yr Group II Expansion Every effort has been made to verify information directly with appropriate company sources. The list will be updated when new information becomes available. #Additional/updated plant data over the past week

ABOUT ARGUS BASE OILS

Transparent methodology A full description of our methodology is available on our website at www.argusmedia.com. You will also ﬁ nd our journalistic ethics policy, a history of Argus, and other useful reference material. Argus Base Oils Outlook Argus Base Oils forward prices methodology A monthly forecast of key base oils prices spanning 12 months into Argus assesses forward base oils prices by applying the inter- the future. month premiums or discounts of the 30-day average of each Key benefits: forward month for gasoil or heating oil futures to the fob • Facilitates short-term planning/budgeting Asia / European export / US SN 500 physical base oil price as • Provides third-party reference price to measure against internal price targets published in Argus Base Oils every week. • Reduces exposure to spot price volatility Argus Base Oils forward premium methodology Click here to request a complimentary issue! Argus assesses the forward base oil premium to gasoil or Or email us: [email protected] heating oil by comparing the physical fob Asia / European export / US SN 500 base oils price published in Argus Base Oils each week with the 30-day average of each forward month for gasoil or heating oil futures. Further details are Market Reporting Petroleum Consulting available at www.argusmedia.com. illuminating the markets Events

Argus Base Oils is published by Argus Media group

Registered offi ce Trademark notice Publisher Customer support and sales: Lacon House, 84 Theobald’s Road, ARGUS, the ARGUS logo, ARGUS MEDIA, Adrian Binks [email protected] London, WC1X 8NL INTEGER, ARGUS BASE OILS , other ARGUS [email protected] Tel: +44 20 7780 4200 publication titles and ARGUS index names Chief operating offi cer are trademarks of Argus Media Limited. ISSN: 2042-9703 Matthew Burkley London, UK Visit www.argusmedia.com/Ft/trademarks Tel: +44 20 7780 4200 Copyright notice for more information. Global compliance offi cer Astana, Kazakhstan Copyright © 2020 Argus Media group Jeff rey Amos Tel: +7 7172 54 04 60 All rights reserved Disclaimer Beijing, China Tel: + 86 10 6515 6512 All intellectual property rights in this publication and the The data and other information published Commercial manager information published herein are the exclusive property herein (the “Data”) are provided on an “as Jo Loudiadis Dubai Tel: +971 4434 5112 of Argus and/or its licensors (including exchanges) and is” basis. Argus and its licensors (including Moscow, Russia Tel: +7 495 933 7571 may only be used under licence from Argus. Without exchanges) make no warranties, express Global SVP editorial limiting the foregoing, by accessing this publication you or implied, as to the accuracy, adequacy, Christopher Johnson Rio de Janeiro, Brazil agree that you will not copy or reproduce or use any timeliness, or completeness of the Data or Tel: +55 21 2548 0817 part of its contents (including, but not limited to, single fi tness for any particular purpose. Argus Managing editor Singapore Tel: +65 6496 9966 prices or any other individual items of data) in any form and its licensors (including exchanges) shall Jim Kennett Tokyo, Japan Tel: +81 3 3561 1805 or for any purpose whatsoever except under valid licence not be liable for any loss, claims or damage from Argus. Further, your access to and use of data arising from any party’s reliance on the Data Editor Argus Media Inc, Houston, US from exchanges may be subject to additional fees and/ and disclaim any and all liability related to Iain Pocock Tel: +1 713 968 0000 or execution of a separate agreement, whether directly or arising out of use of the Data to the full Tel: +65 6496 9944 Argus Media Inc, New York, US with the exchanges or through Argus. extent permissible by law. [email protected] Tel: +1 646 376 6130

Petroleum illuminating the markets.

Licensed to: Shi Jia Lim, Argus Media Limited (London)