WBO ’20: ExxonMobil eyes base oils oversupply, Group I refineries ‘extremely challenged’

LONDON (ICIS)–The global base oils market is oversupplied and Group I refineries are “challenged”, the global sales manager for base stocks and specialities at ExxonMobil said on Thursday.

“There’s a 50,000-bbl/day oversupply, and we could envision the supply overhang exceeding 100,000 bbl/day,” David Parsons told delegates at an industry event.

The larger estimate is based on a scenario with minimal rationalisation.

The “onset of IMO may change that,” added Parsons, referring to the new cap on sulphur emissions for 2020 from the International Maritime Organization, which creates competition for base oils’ feedstock.

It is currently a “buyer’s market”, conceded the major Group I and Group II base oil producer’s speaker, which means there are “many choices” for consumers.

“Group I refineries will be extremely challenged” if they’re not world scale or not integrated, he said.

“Co-products, wax… need to be very effective… [refiners] need to do well with the rest of the barrel.”

Meanwhile, Parsons said growth in Asia had disappointed, denting the lubricants business, but reasons for optimism lie in the “cyclical” nature of the market.

“We’re at the bottom of the cycle for lubricants… these will turn [and we’ll] come closer to equilibrium,” he concluded.

Asked whether Group I was dying and how Group II will fare, Parsons said: “We think Group II is in the heart of the industry, we believe it is or will be the largest component sector for base oils, we think by 2030 it will be 50% of the market. One reason is formulation flexibility, range of viscosities and affordability.

“Is Group I dead? Our view is there is still a place for Group I, even in the context of being extremely challenged with IMO we think it still has a future. Group I is a good source of viscosity, [for] marine oils where solvency and viscosity are still needed.”

ExxonMobil’s David Parsons (left and on screen) interviewed by Ian Field during the ICIS World Base Oils conference in London, 20 February

The 24th ICIS World Base Oils and Lubricants Conference runs on 19-21 February in London.

Front page picture source: Samantha Wright

Additional reporting by Samantha Wright