Argus Base Oils Annual Review 2017

Transcription

1 Argus Base Oils Annual Review 2017 Petroleum illuminating the markets Market Reporting Consulting Events

2 Argus Base Oils - Annual Review Base oil market prices, news and analysis in 2017 prices at a GLAnce Low-high price as of 22 Dec /- refers to price change vs 23 Dec Asia-Pacific Europe Group I SN 150 ex-tank Singapore SN 500 ex-tank Singapore Bright stock ex-tank Singapore SN 150 fob Asia SN 500 fob Asia Bright stock fob Asia Group II N150 ex-tank Singapore N500 ex-tank Singapore N150 fob Asia N500 fob Asia Northeast Asia Group I SN 150 cfr SN 500 cfr Bright stock cfr Group II N150 cfr N500 cfr India and UAE Group I SN 150 (LVI) cfr India SN 500 (LVI) cfr India Bright stock cfr India SN 150 (LVI) cfr UAE SN 500 (LVI) cfr UAE Group II N150 cfr India N500 cfr India Overview Base oil prices rose in 2017 on the back of higher crude prices and unexpectedly tight supplies. US prices got support from sustained tightness caused by plant-maintenance in the first half of the year, then plant-disruptions in the second half caused by several major storms. Tight spot supplies in Europe prompted buyers to turn increasingly to cargoes from the Baltic market to cover requirements in markets like Africa. Asia-Pacific prices rose on the back of strong Chinese demand early in the year. Indian buyers bid at higher levels in the second half in response to sustained tightness. Group I SN 150 fob domestic NWE SN 500 fob domestic NWE Bright stock fob domestic NWE SN 150 fob European export SN 500 fob European export Bright stock fob European export Group II N150 fca ARA N600 fca ARA Group III 4cst fca NWE cst fca NWE , cst fca NWE Russia and FSU contents Group I SN 150 fob Baltic Sea SN 500 fob Baltic Sea SN 150 fob Black Sea SN 500 fob Black Sea US Group I SN 150 fob SN 500 fob Bright stock fob Group II N100 fob N220 fob N600 fob Group III (domestic) 4cst cst cst Naphthenic base oils Pale oil 60 fob Pale oil 100 fob Pale oil 500 fob Pale oil 2000 fob Markets 2-20 Maintenance and market fundamentals 21-23

3 Asia-Pacific Low-high price as of 22 Dec /- refers to price change vs 23 Dec Tight supply supporting Asia base oil prices Asia-Pacific base oil prices rose in 2017 from the previous year, supported by persistent supply-tightness. The exception was bright stock, which ended the year lower than at the start of the year. The tightness reflected the impact of a heavy round of scheduled plant maintenance that affected Group I, Group II and Group III producers in both northeast and southeast Asia. Scheduled plant maintenance work in other regions such as Europe and US tightened supplies in those markets. The limited volumes supported firmer prices that closed the arbitrage to Asia-Pacific, adding to the region s supply tightness. The unplanned and prolonged shutdown of several more plants compounded the tightness. The delayed restart of some plants following scheduled maintenance curbed further the market availability. Unlike the planned shutdowns, producers had no time to build stocks in preparation for the unscheduled shutdowns. Their need to fulfil term commitments forced them to tap supplies from other producers or markets. The moves exacerbated the tightness. Shutdowns exacerbate tightness Most of the plant shutdowns were in the first half of the year. These coincided with the seasonal rise in demand in northeast Asia and southeast Asia. For producers with surplus volumes, expectations of higher prices prompted them to delay their sales until shortly before the shipments loaded. The moves enabled them to lock in higher prices but also added further to the spot-market tightness. The price surge at the start of the year was led by Group II heavy grades. These already began their rise from October 2016 as Chinese buyers started rebuilding stocks earlier than usual. Fob Asia cargo prices peaked for the year at $845/t in early May, following a steady rise from less than $650/t in October The higher prices far outpaced the rise in crude prices during the same period. The premium of Group II heavy grades to Dubai crude rose as high as $480/t in the first half of May That was up from less than $290/t in October It was also the highest level since June Crude prices were above $100/bl at that time, much higher than levels of around $51/bl in May The lower crude price magnified the profitability of the 2017 heavy-grade prices, which in May were more than 2.3 times higher the crude price. That was up from 1.6 times crude back in Surging prices and tight supplies prompted blenders to seek Group I heavy grades instead. Prices for these supplies were at a discount of around $90/t to Group II prices at the start of Group I Asia SN 500 forward prices Jan Feb Mar Q Q The price shows the implied forward-curve base oil price required to maintain its existing profit margin relative to Ice gasoil futures. Refer to for methodology Asia SN 500 forward premium to gasoil SN 150 ex-tank Singapore SN 500 ex-tank Singapore Bright stock ex-tank Singapore SN 150 fob Asia SN 500 fob Asia Bright stock fob Asia Group II N150 ex-tank Singapore N500 ex-tank Singapore N150 fob Asia N500 fob Asia Group III 4cst ex-tank Singapore cst ex-tank Singapore Ex-tank Singapore reference prices Group I Group II SN 150 SN 600 Bright stock N150 N Midpoint ± Jan Feb Mar Q Q The premium shows the implied forward-curve profitability of fob Asia SN 500 relative to Ice gasoil futures. Refer to for methodology Page 2 of 25

4 Asia-Pacific But supply of these base oils was also tight because of plant maintenance work in Thailand, Japan and China in the first half of the year. The tight availability and strong demand supported a surge in fob Asia SN 500 prices. Their discount to Group II N500 then narrowed to just $10/t by April. Bright stock lags Bright stock prices kept pace with higher SN 500 prices in the first two months of the year, as strong Chinese demand left availability tight. But a wave of supplies from southeast Asia, Mideast Gulf, Europe and the US then began reaching China at the end of the first quarter. Shortage turned to oversupply and prices began to slide. Outright bright stock prices peaked for the year at around $915/t in March They then slumped to around $810/t by end-april, before bottoming out at around $ /t by end-june. At that level, they had fallen to a steep discount to prices in Europe and US. That triggered buyers to line up some arbitrage supplies to take to the Americas. The moves, combined with steady demand in Mideast Gulf and some stock replenishment in China, prompted a slow if gradual recovery in prices from the third quarter of the year. The third quarter of the year also saw market price strength switch to light-neutrals from heavy grades. The trend reflected improving regional availability of heavy grades, combined with unexpectedly tight supplies of light grades. The tightness partly reflected the impact of moves by some producers to tweak their output to make more heavy grades instead of light neutrals. Planned maintenance and unexpected production issues in Asia-Pacific in the third quarter added to the drop in supplies. Some surplus supplies were also being moved out of the region to other markets such as Europe and the US. In Europe, Group III plant maintenance in the first half of the year and high Group I light-grade prices kept shut the arbitrage to move light-grade supplies to Mideast Gulf and India. Buyers in those markets turned to Asia-Pacific producers to cover their requirements. Exports from Asia-Pacific to the Mideast Gulf surged in the third quarter to a record high. US storms tighten supply The disruption to production in the US caused by several major hurricanes then compounded the tightness during the last few months of the year. That market focused on covering its own requirements, leaving scant surplus supplies to move to other markets such as Asia-Pacific in the fourth quarter. Rather, there was a pick-up in spot shipments from Asia- Pacific to the Americas markets. This rise in demand kept the Asia-Pacific market tight at a time of year when it too typically struggles with surplus volumes. Crude prices at twoyear highs provided further support. Fob Asia Group II light-grade prices rose to more than $680/t by December, up from $570/t in August. Their discount to Group II heavy grades narrowed to less than $100/t, from around $200/t in early July. Their discount to European Group I prices also narrowed to less than $60/t by December, from more than $200/t in August. A major producer in southeast Asia raised its Group II light-grade prices twice in November. The increase was the first since March. It then raised its Group I heavy-grade prices in December, as well as its Group II light and heavy-grade prices. Asia SN 500 premium to Ice gasoil Fob Asia Group I vs Group II N150 vs SN 150 N500 vs SN Ice gasoil front month = Dec Apr Aug Dec Dec Apr Aug Dec 17 Page 3 of 25

5 Northeast Asia Low-high price as of 22 Dec /- refers to price change vs 23 Dec Northeast Asia base oil prices gain in 2017 Northeast Asian base oil prices rose in 2017 from the previous year. But most of the increase was in the first four months of the year as buyers rushed to cover requirements during a heavy round of plant maintenance in the region. Chinese prices typically start to rise at the start of the calendar year as buyers rebuild stocks in preparation for stronger demand during the spring oil-change season. But prices had already begun to rise strongly from November 2016 as the round of stock-building got underway earlier than usual. Chinese buying starts early Chinese buyers rushed to secure supplies early, partly to avoid the impact of tighter supplies caused by plant maintenance in the first few months of Opec s decision in November 2016 to cut crude output boosted confidence that crude prices would continue to trend upwards. That removed concern about exposure to lower base oil prices. The timing of lunar new year in 2017 was also earlier than usual, in late January. Buyers responded accordingly by bringing forward their replenishment plans. Asia-Pacific producers typically face an overhang of surplus supplies at year-end as they too trim their own inventories. But rather than cut prices to spur buying interest, the surge in demand in late 2016 supported a rebound in regional prices. The surge in cargo prices in northeast Asia at the start of the year opened up arbitrage opportunities beyond the Asia-Pacific market. Imported northeast Asia cargo prices for Group II light grades rose to more than $600/t by the end of January, up from less than $500/t in November. The higher price widened the premium to US light-grade export prices to almost $100/t, from a discount as recently as October The arbitrage opened, prompting a wave of US supplies to be lined up to move to northeast Asia. Some 41,000t of US supplies reached China in the first half of the year, up from typical levels of around 10,000t during the first six months of the year when the arbitrage is shut. Arbitrage flows boost Chinese supplies The price surge extended to Group I base oils. Imported cargo prices for bright stock rose to around $970/t by the end of February, from little more than $800/t at the beginning of December The higher price widened the Group I SN 150 cfr SN 500 cfr Bright stock cfr Group II N150 cfr N500 cfr Group III 4cst cfr cst cfr cst cfr China domestic prices Yn/t Group I, SN 150 Northeast Daqing 6, , , , Dalian 6, , , , North Yanshan 7, , , , South Maoming 7, , , , Group I, SN 400 Northeast Fushun 7, , , , Dalian 7, , , , South Maoming 7, , , , Group II, N150 East Gaoqiao 7, , , , South Huizhou 6, , , , China import price calculator * Yn/t Group I (imported prices) SN 150 7, , , , SN 500 8, , , , Bright stock 9, , , , Group II (imported prices) N150 7, , , , N500 8, , , , * inc. 6% customs duty, 17% VAT and 1, Yuan/t consumption tax. Page 4 of 25

6 Global base oils fundamentals data To facilitate 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 New plants and recent expansions Petroleum illuminating the markets Market reporting Consulting Events

7 Northeast Asia premium to fob Europe export prices for bright stock to more than $250/t. A wave of Group I shipments was then lined up to move from that market to China. Some 34,000t of base oils from Europe then reached China in the first five months of the year, up from around 18,000t during the same period a year earlier. The wave of arbitrage shipments to China from US, Europe and Mideast Gulf joined a surge in Asia-Pacific supplies as regional sellers took advantage of the country s higher import prices compared with competing markets such as India. The subsequent surge in shipments lifted Chinese base oil imports to a record high of more than 1.67mn t in the six months to May. That contrasted with imports of 1.74mn in the whole of But the earlier-than-usual moves to replenish stocks in China were then followed by an earlier-than-usual slowdown in buying from that market. Concern about securing supplies quickly switched in the second quarter of the year to concern about clearing existing stocks amid falling prices. Bright stock prices fall The bright stock market especially faced such concerns. Imported cargo prices for that product fell sharply to little more than $800/t by early June, from $970/t in March. Some buyers sought to back out of deals that they were considering. Others sought to re-export some of their supplies. Those moves to resell supplies extended to the Group II market by the end of the first half of the year. Domestic Chinese prices fell faster than imported Group II cargo prices in the second quarter of the year. That left term buyers booking instant losses for any such imports. They instead reoffered some of these supplies to other markets such as the Mideast Gulf. Prices in those markets were holding at firmer levels, especially for light grades, partly because of a sustained drop in supplies from Europe. But domestic Chinese base oil prices then steadied, before edging higher at the start of the third quarter. Plant maintenance in Taiwan trimmed supplies from that market. Changes to the tax status of white oils in China prompted some domestic producers to curb sales until they clarified the labelling of their supplies. Tighter enforcement of environmental rules also forced some producers to trim runs. The cumulative effect was to tighten supplies at a time of year when the market typically faces slower demand and rising surplus volumes. Light-grade prices rebound A seasonal pick-up in demand at the end of the third quarter provided further price support for light-grade base oils. A surge in domestic diesel prices in the fourth quarter, and tight regional supplies of light-grade base oils, then prompted more producers to raise their domestic prices of the product. The relative price strength of light-grade supplies contrasted with unusually weak demand for heavy-grade base oils in the second half of the year. The weakness reflected increasing domestic supplies of Group I heavy grades, more plentiful regional availability and a seasonal slowdown in demand. Chinese prices for Group II heavy grades fell by some 700 yuan/t ($106/t) in the three months to early November. Prices for imported cargoes of heavy grades also fell, but less steeply. The price dynamic left Chinese term buyers making sufficient profit for imports of light grades. But they barely covered their costs for imports of heavy-grade supplies. In response, some of them sought to reoffer heavy grades to other overseas markets. But demand in those markets was also weak. Base oil prices then rebounded from November. The surge came after Chinese refiners raised sharply their price offers following a surge in domestic diesel prices. At the same time, light-grade supply tightened because of several plant shutdowns in northeast Asia. Bright stock demand revives The fourth quarter of the year also saw a pick-up in Chinese buying interest for bright stock supplies. Some buyers deemed prices for the product to have bottomed by the end of the third quarter. They subsequently secured more supplies at those lower price levels, with a view to storing until the following year. Others sought to replenish depleted stocks following a sharp slowdown in imports in the second and third quarters of the year. Group III base oil prices also rose sharply in the first five months of the year amid tighter supplies of the product. Chinese imports of premium-grade supplies from Qatar slumped by more than a third in the first half of the year. The shortfall was partially countered by a surge in imports from a new Group III producer in the Mideast Gulf. Group III prices then extended gains at a slower pace during the second half of the year amid steadily rising demand for premium-grade supplies. Page 5 of 25

8 India Low-high price as of 22 Dec /- refers to price change vs 23 Dec Tight supply supports Indian base oil prices Indian base oil prices rose steadily in 2017 as the market faced unexpectedly protracted supply tightness throughout the year. The tightness reflected the impact of a heavy round of plant maintenance in Europe, US and Asia-Pacific. A raft of unplanned shutdowns in the first and second halves of the year exacerbated the limited spot availability. With prices in the Indian market typically at lower levels than elsewhere, producers focused on supplying other markets first. Producers limited supplies and Indian buyers dwindling stocks left refiners with more leverage to target higher prices. Buyers increasingly accepted these levels to secure supplies. While the heavy-grade tightness eased in the second half of the year, many buyers struggled to cover their requirements for light grades. Supply from Asia-Pacific producers was already tight at the end of 2016 and beginning of Indian buyers have often been able to replenish their inventories around that time of year as producers have sought outlets for surplus volumes at year-end. But the unexpectedly early and strong pick-up in demand from China absorbed most such volumes and supported higher fob Asia prices. Producers prioritise China over India While Chinese base oil prices rose at a faster pace than fob Asia prices, imported cargo prices in India rose at a slower pace. The price trend added to producers incentive to maximise shipments to China rather than India. South Korean base oil exports to China totalled 520,000t in the five months to March That was up by 28pc or more than 100,000t from year-earlier levels. By contrast, South Korean base oil exports to India came to 294,000t during the same five-month period to March. That was down from 355,000t during the same period a year earlier. The tightness in India was compounded by the shutdown of several domestic base oil plants. One of these shutdowns was scheduled to end in March, but actually extended well into the second quarter of the year. US supplies ease tightness Some Indian buyers even struggled to secure their normal term volumes from Asia-Pacific. That forced them to turn to the spot market, where prices were higher. The move added to already firm spot demand. Group I SN 150 cfr SN 500 cfr SN 150 (LVI) cfr SN 500 (LVI) cfr Bright stock cfr Group II N150 cfr N500 cfr Group III 4cst cfr cst cfr cst cfr Domestic refinery prices Rs/l * ± ± Group I IOC prices, Chennai SN , SN , SN , Bright stock , IOC prices, Mumbai SN , SN , SN , Bright stock , Group II IOC prices, Chennai N , N , N , IOC prices, Mumbai N , N , N , * prices in Rs/l effective from 01 Jan Page 6 of 25

9 India The tightness also boosted interest in supplies from alternative sources such as the Mideast Gulf and US. The US market faced an unexpectedly large volume of surplus supplies at the end of 2016 and in early Record volumes of Group I and Group II supplies were subsequently lined up to move from that market to outlets throughout Asia-Pacific, including India. The wave of these shipments stopped abruptly in March, as a heavy round of plant maintenance work in the US began to gather pace. But the subsequent delivery of those supplies over the following months provided a crucial source of supplies to cover for the drop in shipments from Asia-Pacific. Indian base oil imports from the US surged to a record high of more than 165,000t in the first five months of The volume was up from just 51,000t during the same period a year earlier. Buyers had also sought more premium-grade supplies from the Mideast Gulf. Besides the ready availability of those supplies, their prices moved to increasingly narrow premiums to Group II base oils. For Indian buyers seeking base oils with the appropriate viscosity rather than viscosity index, these supplies were an attractive option. Buyers secured more than 85,000t of these base oils in the first five months of the year. UAE supplies move to other markets But that narrow price gap between Group II and Group III base oils proved short-lived. The Group III premium to Group II N150 widened to around $70/t by early April, up from around $10/t just a month earlier. The price rebound reflected rising demand for Group III supplies from the UAE from an increasingly large number of outlets. One such outlet was the US, which sought alternative supplies to cover for a sharp drop in premium-grade base oils from Qatar. Another outlet for those supplies was Europe. Group III prices in that market had surged to steep premiums to every other major market in response to tight supplies and strong demand. Besides a drop in imports from Qatar, the shutdown of a major Group III plant in Spain from May exacerbated the tightness. With more premium-grade supplies moving from the UAE to Europe and the US, there was a steep drop in shipments to India. Buyers imported less than 60,000t of those UAE supplies in the next five months to September. Besides attracting more Group III supplies to Europe, the Group III plant shutdown in Spain curbed the shipment of very-light-grade base oils to India. This coincided with moves by producers in South Korea to cut light-grade output and boost production of heavy grades, which enjoyed significant premiums to light grades. The combined effect was a slump in supplies of 3cst base oils from Spain and South Korea to India. Buyers secured just 186,000t of supplies from those two markets in the first three quarters of the year, down by 28pc from year-earlier levels. The strong demand and tight supplies left base oil values at unusually firm levels by the end of June. The premium of Group II heavy grades to crude had risen to more than $530/t, its highest level since mid The light-grade premium to crude rose to a four-year high of $340/t. Monsoon, new tax dampen demand That price strength began to ease from mid-year. The Indian market faced a seasonal slowdown in demand from June as the onset of the monsoon season curbed lube consumption. India s introduction of a new goods and services tax from the beginning of July prompted some buyers to defer their imports because of uncertainty about the impact of the new tax. Slowing demand from China and the completion of most plant maintenance in Asia-Pacific also freed up more supplies to move to other markets, such as India. But any significant pick-up in shipments to India remained muted during the second half of the year. Production issues or maintenance work affected several plants in Asia-Pacific in the third quarter of the year. An open arbitrage to Europe spurred some Asia-Pacific producers to move shipments to that market. Unusually strong demand in the Mideast Gulf also spurred a wave of shipments to that market. The unexpected plant disruptions in the US caused by several large hurricanes then turned that market from one facing the prospect of growing surplus to one in need of additional supplies from elsewhere. Indian buyers had coped with limited supplies during the third quarter because of the slowdown in demand. But they needed to replenish their supplies from September to prepare for a seasonal rise in lube demand during the last quarter of the year. Page 7 of 25

10 India Buyers struggle to replenish stocks Some of them had been anticipating a pick-up in supplies from the US during that time to help to cover those requirements. But the sudden tightness in the US market kept that arbitrage to India shut there would be no year-end wave of supplies from the US to India in The arbitrage did finally begin to reopen at the end of the year as US supplies began to recover. But those shipments were only scheduled to reach India in the first quarter of Spot supply in Asia-Pacific and Mideast Gulf also remained tight as more supplies from those regions also moved to the Americas. The subsequent tightness supported a sustained rise in cfr India N150 prices throughout the second half of the year. Prices rose from around $640/t cfr in August to more than $750/t cfr by December. The price strength helped to counter the impact of surging crude prices during the same period. After easing in the third quarter, the N150 premium to crude held around $300/t by year-end. That was much higher than typical levels at a time of year when margins are usually under much greater pressure because of rising surplus supplies. Indian buyers would typically take advantage of that surplus at lower prices to replenish stocks. Light-heavy price-spread narrows The relative stability of N150 versus crude contrasted with a slump in the premium of N500 to crude during the second half of the year. While crude rose, outright N500 prices fell to around $810/t by September, down from $890/t in May. Its weakness was replicated throughout the Asia-Pacific and Mideast Gulf markets. But outright prices then began a gradual recovery in the fourth quarter ahead of a seasonal rise in consumption of heavy grades from the first quarter of While demand was rising for all grades, the supply tightness was on course to extend into the start of That left the Indian market facing the prospect of starting the new year with lower stocks than usual. But many buyers were anticipating that the expected start-up of new Group II production capacity in the Mideast Gulf from late 2017 would put an end to this prolonged period of supply tightness. And delays to the expected start-up of new Group II production capacity in the Mideast Gulf from late 2017 to the first quarter of 2018 added to that tightness. Indian base oils vs Europe SN 150 Bright stock Dec Apr Aug Dec 17 * India midpoint price vs Europe high price Global Group II base oil prices Argus N150 cfr India Argus N150 fob Asia Argus N100 fob US Dec Apr Aug Dec 17 Chinese / Indian base oil imports 000 t China India Oct 14 Oct 15 Oct 16 Oct 17 Page 8 of 25

11 Mideast GULF Low-high price as of 22 Dec /- refers to price change vs 23 Dec Mideast Gulf base oil tightness benefits Iran Mideast Gulf base oil prices rose in 2017 as an unexpected and prolonged drop in arbitrage supplies from Europe and the US forced buyers to turn to Asia-Pacific. With supplies from Russia also limited, producers in Iran had more leverage to target higher prices. Strong Chinese demand in late 2016 and early 2017 attracted a wave of Group I shipments from Europe to China. Buyers in the Mideast Gulf were interested in some of these supplies. But buyers in China bid at higher levels, limiting the availability of supplies for other markets. Supplies fall from Europe, Russia Rising demand and tighter supplies in Europe then spurred higher prices in that market, closing the arbitrage. The arbitrage then remained shut throughout most of the rest of the year because of the persistently high European prices. The price strength reflected strong demand and tight supplies in Europe in the first half of the year. But European prices remained high even as spot availability increased in the third and fourth quarters of the year. Supplies to the Mideast Gulf from Russia were also limited and sporadic. The trend partly reflected a steep drop in Russian base oil exports from Black Sea ports, and a reciprocal rise in those supplies from Baltic ports. Those supplies moved to other markets such as Europe and Africa. Even supplies from the Black Sea that moved to the Mideast Gulf mostly went to term buyers. That left scant supplies available in the spot market for other buyers. Group I supplies from Iran are the key source of supplies for the region. Prices for these supplies are often influenced by competition from Europe and Russia. The lack of such competing supplies throughout most of 2017 left Iran s producers with more leverage to target higher prices, which they did. One Iranian producer focused more in 2017 on its domestic lubricants operations. It diverted more of its base oils to its downstream units in response. Others focused more on exports. But with domestic base oil prices in Iran pegged at higher levels, Iranian buyers were incentivised to seek imported supplies from other markets instead of domestic supplies. These included shipments from Turkmenistan and a steady flow of supplies from Malaysia. Group I SN 150 cfr UAE SN 500 cfr UAE SN 150 (LVI) cfr UAE SN 500 (LVI) cfr UAE Group III Iran export prices Sepahan Oil * ± SN 500+ fob (bulk) NA nc SN 500 fob (bulk) nc Rubber process oil fob (drum) nc Slack wax fob (drum) nc Paraffin wax fob (slab) nc * base oil prices on a fob Bushehr basis; RPO/slack wax/paraffin wax prices on a fob Bandar Abbas basis, effective from 29 December - 04 January 4cst ex-tank UAE cst ex-tank UAE cst ex-tank UAE SN 150/sn 500 vs (LVI) SN 150/sn SN 150 SN Dec Apr Aug Dec 17 Page 9 of 25

12 MIdeAst GULF Low-high price as of 22 Dec /- refers to price change vs 23 Dec Mideast Gulf base oil tightness benefits Iran Mideast Gulf base oil prices rose in 2017 as an unexpected and prolonged drop in arbitrage supplies from Europe and the US forced buyers to turn to Asia-Pacific. With supplies from Russia also limited, producers in Iran had more leverage to target higher prices. Strong Chinese demand in late 2016 and early 2017 attracted a wave of Group I shipments from Europe to China. Buyers in the Mideast Gulf were interested in some of these supplies. But buyers in China bid at higher levels, limiting the availability of supplies for other markets. supplies fall from europe, Russia Rising demand and tighter supplies in Europe then spurred higher prices in that market, closing the arbitrage. The arbitrage then remained shut throughout most of the rest of the year because of the persistently high European prices. The price strength reflected strong demand and tight supplies in Europe in the first half of the year. But European prices remained high even as spot availability increased in the third and fourth quarters of the year. Supplies to the Mideast Gulf from Russia were also limited and sporadic. The trend partly reflected a steep drop in Russian base oil exports from Black Sea ports, and a reciprocal rise in those supplies from Baltic ports. Those supplies moved to other markets such as Europe and Africa. Even supplies from the Black Sea that moved to the Mideast Gulf mostly went to term buyers. That left scant supplies available in the spot market for other buyers. Group I supplies from Iran are the key source of supplies for the region. Prices for these supplies are often influenced by competition from Europe and Russia. The lack of such competing supplies throughout most of 2017 left Iran s producers with more leverage to target higher prices, which they did. One Iranian producer focused more in 2017 on its domestic lubricants operations. It diverted more of its base oils to its downstream units in response. Others focused more on exports. But with domestic base oil prices in Iran pegged at higher levels, Iranian buyers were incentivised to seek imported supplies from other markets instead of domestic supplies. These included shipments from Turkmenistan and a steady flow of supplies from Malaysia. Group I SN 150 cfr UAE SN 500 cfr UAE SN 150 (LVI) cfr UAE SN 500 (LVI) cfr UAE Group III Iran export prices sepahan oil * ± SN 500+ fob (bulk) NA nc SN 500 fob (bulk) nc Rubber process oil fob (drum) nc Slack wax fob (drum) nc Paraffin wax fob (slab) nc * base oil prices on a fob Bushehr basis; RPO/slack wax/paraffin wax prices on a fob Bandar Abbas basis, effective from 29 December - 04 January 4cst ex-tank UAE cst ex-tank UAE cst ex-tank UAE sn 150/sn 500 vs (LvI) sn 150/sn SN 150 SN Dec Apr Aug Dec 17 Page 9 of 25

13 argusmedia.com Complimentary Argus Forum: Global Base Oil Outlook in February pm London, UK Unexpectedly tight base oil supply defined the year 2017 in every major market because of a combination of a heavy round of plant maintenance and a steady stream of unforeseen plant shutdowns. The supply-tightness transformed procurement patterns and changed arbitrage flows. The repercussions are set to extend at least into early The seventh Argus Base Oil Forum will look back at some of the key events that fed the tightness in 2017, and look forward to how those events are likely to impact the market over the coming months. For more information or to register: : info@argusmedia.com :+44 (0) illuminating the market Market reporting Consulting Events

14 Mideast GULF While Iranian buyers targeted overseas supplies, regional buyers sought more Iranian supplies. A large wave of these shipments was secured in the first three months of the year. The surge in demand led to a backlog of loadings and delayed shipments. A large volume of these supplies moved to India. That trend extended through the rest of the year, as Indian importers secured more than 200,000t of supplies from Iran in the first 11 months of A steady flow of Iranian supplies was also offered in flexibags to markets such as Asia-Pacific. Steady demand supports higher Iranian prices The sustained interest in these heavy-grade supplies, and lack of competing volumes, helped to support a steady rise in prices. These climbed to more than $760/t fob Iran by the end of the year. The price was up from $620/t at the start of the year and the highest since Buyers also supplemented their stocks with some Group I and Group II supplies of US origin in the first few months of the year. These were part of a wave of arbitrage shipments from the US in the first quarter of But that flow of supplies ended in March as availability in the US tightened. Buyers target Asia-Pacific supplies Buyers instead increasingly began to turn to the Asia- Pacific market for supplies. The move coincided with a slowdown in Chinese demand from the second quarter of the year. Some Chinese buyers responded to the slowdown by re-offering some of their term volumes to other markets. Some of these supplies moved to the Mideast Gulf. The supplies initially consisted mostly of Group II base oils. Some shipments of Group I base oils of Asia-Pacific origin also then moved to Mideast Gulf as availability of those supplies also increased. Demand was focused especially on Group II light grades. Prices for these supplies were lower than prices for Group I supplies of European origin. There was anyway scant availability of those supplies because of the closed arbitrage from Europe. The strong demand for Group II light grades also coincided with blenders concerns about the possibility of the delayed start-up of new Group II capacity in the region. Buyers had been expecting delivery of these new supplies to start from October. That date was then adjusted to January The sustained interest in Group II supplies in the third quarter provided a convenient outlet for surplus supplies in Asia-Pacific, especially of light grades. Base oil exports from South Korea to the UAE surged to more than 50,000t in the third quarter. The volume was more than double year-earlier levels and a record high. Asia supplies dwindle in fourth quarter But these supplies from Asia-Pacific dwindled in the fourth quarter. A pick-up in Chinese demand late in the year curbed surplus volumes for other markets. Some plant maintenance work in northeast Asia trimmed supplies further. Some producers also moved more supplies to the Americas market. That region faced unexpected supply shortages because of storm-related disruptions to production in September and October. Stronger demand from the US also spurred a surge in Group III supplies to that market from the Mideast Gulf. The move followed a sustained rise in such shipments to the US throughout the year. The rise in these Group III supplies followed the prolonged shutdown of a gasto-liquids refinery in Qatar from the end of The shutdown coincided with a slump in supplies of premiumgrade base oils from Qatar to the US. Some Mideast Gulf Group III supplies remained within the region. But the volume was limited by strong demand for these supplies in Europe, US and Asia-Pacific. That trend was unlikely to change, even with a change in the marketing structure of a joint-venture Group III plant in Bahrain from the fourth quarter of the year. Black Sea vs UAE (LVI) SN 150 SN 500 * Black Sea high price vs UAE midpoint price 30 Dec Apr Aug Dec 17 Page 10 of 25

15 Europe Low-high price as of 22 Dec /- refers to price change vs 23 Dec Tightness prompts buyers to seek term supplies The European Group I base oil market will face tight availability in the first-half of 2018 as plant maintenance and increased term contract allocations reduce spot supplies. Buyers have moved to increase the proportion of requirements covered by term contracts, to guard against the possibility of supply shortages. The change in strategy follows unusually tight availability in the first half of The European market has become more vulnerable to supply disruptions because of a 1.2mn t/yr drop in production capacity following Group I plant closures in 2015/16.The impact of the closures in the first half of the year was exacerbated by an unexpected plant shutdown in Japan in That triggered a larger than usual flow of European supplies to Asia-Pacific. At the same time, there was prolonged and more frequent maintenance on ageing refinery infrastructure in Europe. Tightness triggers price-surge The tightness triggered a 27pc rise in domestic Group I light-grade prices in the first half of the year to $ /t. The scant spot availability spurred an even steeper rise in export prices that almost erased their discount to domestic prices. Domestic prices fell by just 6pc in the five months to early-december even as supplies rose and demand weakened. Similar disruption to supply and heavy maintenance during peak demand in the first half of 2018 would pressure prices higher again. But the move to lock in more supplies with term contracts is likely to cut liquidity in the spot market in Like 2017, the pick-up in seasonal demand is expected to begin in February and peak around May. With surplus capacity limited, the spot market is again likely to be more susceptible to supply disruption during this time. The combination of reduced liquidity and high demand could make prices even more volatile, especially in the export market, which is more sensitive to supply dynamics involving other regions. Many of the term contracts will be linked to published prices, which are themselves linked to the spot market. While buyers may have guaranteed more of their supplies, they are unable to avoid the impact of tightness on prices if their contracts are linked to the spot market. Improving supply pressures prices But Group I price movements in the second half of 2017 stood in contrast to the first half as improved supply and weaker demand curbed the ability of producers to pass on the higher feedstock prices that came from rising crude Group I SN 150 fob domestic NWE SN 500 fob domestic NWE Bright stock fob domestic NWE SN 150 fob European export SN 500 fob European export Bright stock fob European export Group II /t N100 fca ARA N150 fca ARA N220 fca ARA N600 fca ARA Group III /t 4cst fca NWE cst fca NWE , cst fca NWE Turkey Group I SN 150 cfr Gebze SN 500 cfr Gebze values. Prices also ignored the sharp rise in diesel and gasoil prices in second-half The trend resulted in a slump in base oil values relative to crude, diesel and gasoil in the period, although they were still higher than usual for the time of year. Domestic European SN 150 base oil price premiums to 30-day Ice gasoil futures edged down to $176/t versus year earlier levels of $164/t. The SN 500 premium slipped to $254/t but held above year earlier levels of $229/t. The dynamic is unlikely to repeat in the first half of 2018 as supply tightens and demand rises. That will give producers the leverage they need to respond faster to higher feedstock and competing fuel prices. Any failure to respond could incentivise refiners to produce more motor fuels instead of base oils further limiting base oil supply. US exports to Europe surge US exports of Group II supplies to Europe rose to 466,000t in the first six months of 2017, up from 409,000t during the same period a year earlier. The increased availability encouraged more blenders to use the higher-quality product. Imports remained steady in the second half of 2017 even after several major storms caused massive disruptions to US production during the last four months of the year. Page 11 of 25

16 Europe Low-high price as of 22 Dec /- refers to price change vs 23 Dec But high prices for these supplies relative to Group I base oils, especially in the second half of the year, and the lack of a supplier competition, slowed the switch to Group II. That could change in 2018 as the market readies for the start-up of ExxonMobil s new Group II base oil unit in Rotterdam in January The unit will have a capacity of around 1mn t/yr and produce EHC50 and EHC120 base oils. The start-up will represent the first domestic production of Group II base oils. These grades imported from Asia- Pacific and the US are expected to be available in 2018 as the major seeds the market ahead of the start-up. A new 715,000 t/yr Group II unit in the Mideast Gulf is unlikely to have a direct impact on the European market. Supplies from the unit are likely to be available in the first quarter of 2018, and exports will be targeted at regional markets such as the Mideast Gulf, India and Africa. But the new capacity could displace existing suppliers volumes into those markets. They may in turn move more supplies to Europe. Market readies for new supplies New supply will compete with current Group II approved and unapproved imports from the US. Volumes will also compete with Group I as rising demand for higher-quality, more environmentally-friendly industrial and marine lubricants drives rationalisation. The growing availability of Group II supplies from a larger number of sources, as well as tightening engine oil specifications, is likely to encourage a switch to the higher-quality base oils. Competitive pricing for Group II grades would boost the attraction of using these base stocks, especially as a lower-cost alternative to Group III in some formulations. But lower Group III prices relative to Group II in 2017 partially curbed that price advantage. The Europe Group III 4cst premium to Group II N150 prices averaged around $79/t in 2017, down from $148/t in Compliance with the 2016 ACEA Sequences for engine oils will come into effect on 1 December Lubricants sold in Europe must then meet these more stringent specifications. Blenders will seek to minimise costs while meeting these requirements and this could encourage group switching. The extent of group switching will depend on the availability and cost level of the new Group II supplies. The Group III market for approved base oils is expected to face tight supplies in the first half of 2018 as four major producers plan to shut down for plant maintenance in March, during the peak demand season. European forward premium to gasoil SN 150 sn 500 Midpoint ± Midpoint ± Jan Feb Mar Q Q The premium shows the implied forward-curve profitability of fob Europe SN 150 and SN 500 relative to Ice gasoil futures. Refer to for methodology European forward prices SN 150 sn 500 Low High +/- Jan Feb Mar Q Q The price shows the implied forward-curve base oil price required to maintain its existing profit margin relative to Ice gasoil futures. Refer to for methodology Group III supplies tighten Such a trend would contrast with the beginning of 2017, when the market faced oversupply and unusually low prices. Their premium to Group I base oils bottomed at around $55/t in February, down from an average of more than $220/t in Their unusually small premium to Asia-Pacific prices, and a steep discount to US prices, also incentivised producers to prioritise those markets instead. Group III supply tightened sharply in first-half 2017 because of a combination of scheduled, unannounced and unexpected plant-maintenance work in Europe and Mideast Gulf. The slump in gas-to-liquids supplies from Qatar spurred a switch to alternative premium-grade supplies. Later in the year, changes to a joint-venture agreement between Finnish refiner Neste and Bahrain s state-owned Bapco cut availability of supplies with approvals. Previously, all the supplies from Bapco s Sitra refinery had been deemed as approved supplies. With supply tighter, Group III base oil prices rebounded to a premium of more than $200/t to Group I prices by early December Any delays to turnarounds or further unexpected shutdowns will compound tightness. While base oil exports from Qatar recovered in second-half 2017, any slowdown in supplies from that source would also exacerbate any tightness in early With maintenance set to affect import volumes and growing demand from the high-end engine oil market, some Group III producers have already sold all their allocated volumes for 2018 to term customers. Page 12 of 25

17 Europe Low-high price as of 22 Dec /- refers to price change vs 23 Dec Unapproved Group III supplies rise The European market for Group III supplies with no or limited approvals is set to be more balanced in the first half of There were regular imports of these supplies from the Mideast Gulf, Russia and the US in This plentiful availability helped to maintain prices at a discount of around $ /t to approved supplies. Expectations of tighter availability of approved supplies in early-2018 could help support an even wider premium to supplies without approvals. Conversely, that same tightness, and the large price-premium, has been prompting buyers to seek more unapproved supplies to cover requirements and cut their costs. This overflow of demand from the approved into the unapproved market may bolster prices. With the European market yet to transition more fully to premium-grade supplies, European Group I producers enjoyed firmer than usual prices relative to crude and diesel in These averaged around $249/t for Group I light grades versus diesel in 2017, up from $166/t in But that price strength could come under pressure as plant investments and upgrades currently underway start operations. These are expected to add over 3.5mn t/yr of new Group II, Group II+ and Group III supplies to global capacity in the next two years. Some European producers are responding by considering plant upgrade options. Producers aim to target higher prices as Group I supply falls and the product turns increasingly into a niche market. The African market will also become increasingly important as an export destination for Group I surplus volumes as European buyers transition to premium grades. Market faces major changes The ongoing transformation of the base oil market is set to change the fundamentals and price dynamics of Group I, Group II and Group III base oils. The recent price-strength of Group I base oils could get support from ongoing demand and tighter supply in the short-term as they become confined to niche product status. Blenders that are quicker to transition to Group II formulations could be better placed to avoid such a dynamic. Continued Group I price strength and a tight Group III market could also encourage blenders to switch to Group II based formulations as the market becomes increasingly liquid. Ultimately, rationalisation in Europe will be driven by blenders need to meet advancing technical and environmental requirements while maintaining margins for finished lubricants whose prices remain relatively stable when compared to fluctuating raw material costs. European SN 500 premium to Ice gasoil Ice gasoil front month = Dec Apr Aug Dec 17 European 4cst vs SN 150, vs US 4cst Vs SN 150 fob domestic NWE Vs 4cst US domestic Dec Apr Aug Dec 17 Arbitrage opportunities - SN 150 fob European export Vs Argus ex-tank Singapore Vs Argus US domestic Vs Argus cfr Northeast Asia Dec Apr Aug Dec 17 Page 13 of 25

18 RussIA and FSU Low-high price as of 22 Dec /- refers to price change vs 23 Dec Strong demand supports FSU base oil prices Base oil prices in the Baltic and Black Sea markets rose steadily in 2017, supported by persistent demand for a regular flow of spot supplies. That trend looks set to extend into The availability of these supplies contrasted with unexpectedly tight spot volumes from other producers both in Europe and in other key markets like US and Asia- Pacific. The supply-tightness in Europe reflected the impact of a drop in production-capacity in the region following the closure of two base oil plants the previous year. The impact of that drop in capacity was cushioned in 2016 as buyers built stocks ahead of the plant closures. There was no repeat of such a strategy in While buyers had lower stocks, European producers had increasingly limited supplies in the first half of the year because of a heavy round of plant maintenance. In other markets, the US and Asia-Pacific regions faced an unusually heavy round of plant-maintenance in firsthalf Unexpected plant shutdowns in Asia-Pacific and Mideast Gulf compounded the tightness. Buyers turn to Baltic supplies The limited availability of spot volumes in those other markets boosted interest in supplies from the Baltic market. But there was strong competition for those supplies. Trading firms sought volumes to move cargoes to other markets. Regional buyers sought supplies to cover their own operations. There was also strong demand from domestic blenders in Russia. Baltic SN 150 vs VGO, vs domestic nwe Premium to VGO 1.6% cif NWE Discount to fob domestic NWE 30 Dec Apr Aug Dec 17 Baltic Sea Group I SN 150 fob SN 500 fob Black Sea Group I SN 150 fob SN 500 fob Naushki Group I SN 150 cpt SN 500 cpt Russian base oils, lubes rail/river exports 000t Nov Oct ± Nov Oct ± Rail Overland Baltic Afganistan Kaliningrad Armenia nc Liepaja Azerbaijan Riga Belarus Ventspils China St.Petersburg Hungary nc North Korea nc Black Sea Finland Taganrog Kazakhstan Yeisk nc Kyrgyzstan Kavkaz Latvia Novorossiysk Lithuania Reny nc Moldova Odessa nc Mongolia Azov nc Romania Poland River Georgia Volgograd Tajikistan Turkmenistan Far East Ukraine Nakhodka Uzbekistan Total Russia rail, river exports Russian base oil, lubes rail/river exports by supplier 000t Nov Oct ± Nov Oct ± Volgograd Yaroslavl by rail Ufa by river Orgkhim N.Novgorod nc Obninsk Perm Sofrino Novokuibyshevsk Orenburg nc Angarsk Omsk Nizhnekamsk Other Total Page 14 of 25

19 RussIA and FSU The strong buying interest had to contend with a typical drop in supplies in the first and second quarters of the year because of plant maintenance affecting several Group I and Group III plants. But trading firms began to enjoy an advantage over other buyers because of their room to bid at increasingly high prices for the supplies. That leverage followed a rise in European export cargo prices to similar levels to domestic European prices. The gap between domestic and European export prices is typically more than $50/t. The narrow gap reflected the unusually tight availability of spot supplies in Europe because of plant-maintenance work and more supplies committed to term contracts. Tight European supplies, and high prices for those volumes, contrasted with more plentiful Baltic supplies at much more competitive levels. The premium of European SN 500 export prices over fob Baltic prices rose as high as $135/t by May. That was up from $60/t in January and the highest level in two years. The lower Baltic prices spurred strong demand from a raft of markets including Europe, north and west Africa, Turkey, and by mid-year, central America. The lack of competition from European supplies gave trading firms the room to bid at much higher fob Baltic levels than regional or domestic Russian buyers. Angarsk supplies head to Baltic market The strength of that demand, and the competitiveness of these prices, even attracted a steady flow of Group I supplies from Rosneft s Angarsk plant in far east Russia from April. Those shipments typically moved to China in view of the much lower freight cost to that market. But Baltic prices were high enough to more than cover for that freight difference. At the same time, the Chinese market was facing a slowdown in demand after buyers built up stocks much earlier than usual in late 2016 and early With weak demand in that market, the premium of fob Baltic SN 150 prices over cpt Naushki prices rose to more than $230/t by June. That was up from less than $100/t in March and the highest level in more than four years. The strong demand in the Baltic market at competitive prices attracted an unusually large wave of supplies to terminals in the region. Russian base oil exports to Baltic ports rose to more than 315,000t in the first eight months of the year. That was up from less than 230,000t during the same period in By contrast, Russian base oil shipments to China fell to 40,000t during the same eight month period, down from 60,000t during the same period a year earlier. Russian and Belarusian base oil export duty * Jan 2018 Dec 2017 Nov 2017 Oct 2017 Sep 2017 Aug Jul 2017 Jun 2017 May 2017 Apr 2017 Mar 2017 Feb * tax paid by producer for base oils export outside of Russia, Belarus, Kazakhstan, Tajikistan and Kyrgyzstan Russian domestic base oil supplies 000t Supplier Nov. 16 ± Oct. 16 Lukoil Volgograd Rosneft Novokuibyshevsk Bashneft Ufa Lukoil Perm Rosneft Angarsk Gazpromneft Omsk Gazpromneft/Rosneft Yaroslavl Orgkhim Tatneft Nizhnekamsk Rosa Lukoil Tyumen Shaumyan lube plant Devon Group Sofrino lube plant Rosneft Ryazan Experimental plant Neftekhim Obninskorgsintez Others TOTAL European export vs Baltic/Black Sea Vs SN 150 fob Baltic Sea Vs SN 150 fob Black Sea Vs SN 500 fob Baltic Sea Vs SN 500 fob Black Sea 30 Dec Apr Aug Dec 17 Page 15 of 25

20 RussIA and FSU Black Sea supplies fall The Black Sea market also faced a drop in supplies to just 158,000t during the first eight months of the year, versus year-earlier levels of almost 180,000t. Fob Black Sea prices for SN 150 and SN 500 fell to discounts of as much as $100/t to fob Baltic prices in the first seven months of the year. The drop in supplies slashed the flow of shipments to markets like Turkey and India. The flow of supplies to Baltic ports included a large volume of Group III supplies from Tatneft s Nizhnekamsk refinery. There was strong demand for the supplies in view of their steep discount to prices for Group III supplies with approvals in the European market. But those volumes slowed from April, ahead of the shutdown of Tatneft s 186,000 t/yr base oil plant in May for scheduled maintenance work. Demand from trading firms in the Baltic market then began to ebb from July. The slowdown coincided with improving availability of spot supplies and slower demand in the European market. The steep premium of European export prices over Baltic prices also began to narrow. The SN 150 premium over Baltic prices slipped to less than $70/t by November, from more than $160/t in May. The slowdown in demand from trading firms provided regional buyers with the opportunity to replenish stocks. These had dwindled amid difficulty securing supplies because of the strong demand from the Baltic market. Domestic blenders in Russia also moved to secure supplies ahead of the harvesting season from August. The moves to replenish inventories helped to soak up supplies during the summer months. That in turn helped to support prices at relatively firm levels. That relative price strength contrasted with lower European prices and improving supplies in that market during the third quarter. A less attractive arbitrage to markets like Europe, and concern about a steeper price correction, prompted moves to cut stocks being held at Baltic terminals. That triggered a surge in shipments from the Baltic market to more than 86,000t in August and September. That was up from less than 65,000t during the preceding two months, and less than 45,000t in October and November. But a price-correction failed to materialize. Instead, the unexpected supply-tightness in the US and production issues in Europe countered the impact of slower regional demand. With stocks at low levels, and crude at more than $60/bl, some buyers sought to take advantage of more plentiful Russian supplies at year-end to replenish inventories in preparation for Russian base oil and lubricants rail exports 000 t Russian rail exports via Baltic/Black Sea 000 t Total Baltic Sea Black Sea Jan May Sep Dec 0 Oct 16 Feb 17 Jun 17 Oct 17 Page 16 of 25

21 US Low-high price as of 22 Dec /- refers to price change vs 23 Dec US Group II and Group I base oils prices remained firm through 2017, supported by persistently tight supplies. But Group III prices came under pressure from increased supplies. US Group I and Group II base oils prices held unusually firm relative to feedstocks and competing fuels prices through most of The Argus domestic US Group I SN 150 and Group II N100 prices firmed on a weekly basis through November. The Argus Group II N100 premium to vacuum gasoil (VGO) and diesel rose to a four-and-a-half-year high in mid- June In late December 2017, the Argus Group II N100 premium to VGO and diesel prices remained nearly $0.25/ USG higher than year-earlier levels. A surge in US base oils exports added to and helped to sustain tight supplies throughout the year. US exports increased by 46pc in the first ten months of 2017 compared with the same period a year earlier. This trend of high exports is likely to continue in Regular shipments of Group I heavy grades began moving to southeast Asia from February. These helped to cover a shortage of supplies after the shutdown of TonenGeneral s Group I base oils unit in Japan following a major fire at the plant in January. More Group II supplies from the US Gulf coast have moved to Europe in Some of these additional supplies have started to move ahead of the expected start-up of Group II production in the region in early Mexico absorbs more US supplies The Mexican fuel market has become a key outlet for surplus light-viscosity paraffinic and naphthenic base oils in the US. The use of extra-light-viscosity base oils as a fuel extender for diesel has grown in the Mexican market over the past two years. US base oils exports to Mexico increased by 65pc from the second quarter of 2015 to the second quarter of Mexico s base oils imports have increased substantially even as its lubricant demand has declined. This trend is likely to continue as long as it remains cheaper to import light-grade base oils than it is to import diesel. A heavier-than-usual round of planned and unplanned refinery maintenance also curbed supply availability in Most Group II producers had at least one turnaround from March through early July This helped to keep supplies tight during this period. Group II supplies began to recover in July. This prompted all of the major Group II producers to lower their base oils prices in mid-august. Argus USGC domestic prices $/USG Group I SN SN Bright stock Group II N N N Group III 4cst cst cst Volume: 50t minimum Argus USGC Group I bulk export prices $/USG SN 150 fob SN 500 fob Bright stock fob Volume: 1,000t minimum Argus USGC Group II bulk export prices $/USG N100 fob N220 fob N600 fob Volume: 1,000t minimum Argus USGC naphthenic domestic prices $/USG Pale oil Pale oil Pale oil Pale oil Volume: 20t minimum Argus USGC naphthenic bulk export prices $/USG Pale oil 60 fob Pale oil 100 fob Pale oil 500 fob Pale oil 2000 fob Volume: 1,000t minimum Page 17 of 25

22 US Low-high price as of 22 Dec /- refers to price change vs 23 Dec Hurricanes extend supply tightness But a series of hurricanes in the US Gulf coast between late August and early October curbed production at several Group II and naphthenic refineries. ExxonMobil s Baytown, Texas and Motiva s Port Arthur, Texas base oils plants were shut down for four to five weeks from late August because of flooding caused by Hurricane Harvey. Chevron s Pascagoula, Mississippi refinery also had an unplanned shutdown for more than two weeks from early October because of Hurricane Nate. Many of the refineries that had storm-related supply disruptions continued to work to rebuild stocks and backfill shipments well into the fourth quarter of the year. As a result, Group II and Group I supplies remained limited in the fourth quarter. US base oils producers typically seek to clear a growing surplus in the final three months of the year amid a seasonal slowdown in demand. But higher crude and feedstock prices in the fourth quarter helped to support firmer base oils prices at a time of year when prices typically face downward pressure. Producers clear limited surplus The Group II and Group I producers that did have surplus supplies in November and December had smaller surplus overhangs than usual for the time of year. They also quickly cleared these supplies in the export market. Some producers sold in December most of their surplus supplies for January. Most Group II and Group I producers ended 2017 with lower than usual inventory levels. Group III base oils prices faced downward pressure amid increased overseas and domestic supplies. More semi-approved supplies from the Mideast Gulf continued to move to the US. A large volume of these supplies were used to cover for the drop in supplies in gas-to-liquids base oils in the US. A couple of US producers converted some of their Group II production to Group III in late 2016 and early These unapproved 4cst and 6cst supplies began to be offered in the domestic market in the second quarter of The increase in premium-grade supplies in the US prompted the Group III 4cst premium to Group II N100 to narrow in The Group III 4cst premium to Group II N100 fell below $1/USG in mid-may and maintained a narrower spread in the second-half of the year. More unapproved Group III supplies from the Mideast Gulf will target the US in US SN 500 forward prices $/USG Jan Feb Mar Q Q The price shows the implied forward-curve base oil price required to maintain its existing profit margin relative to Nymex heating oil futures. Refer to for methodology US SN 500 forward premium to heating oil $/USG Midpoint ± Midpoint ± Jan Feb Mar Q Q The premium shows the implied forward-curve profitability of fob US export SN 500 relative to Nymex heating oil futures. Refer to for methodology US N100 vs SN 150, US 4cst vs N US SN 500 premium to VGO 2% $/USG 26 Dec Dec Dec Dec 17 $/USG 26 Dec Dec Dec Dec 17 Page 18 of 25

23 US Naphthenic base oils US naphthenic base oils prices also held firm through most of 2017, supported by higher crude prices, increased exports and unplanned shutdowns in the second half of the year. US naphthenic base oils production increased in Most of the increased output was heavy-viscosity pale oils. These surplus heavy-grade naphthenics were cleared throughout the year to west Africa. The Mexican fuel extender and lubricant markets were ready outlets for surplus US light viscosity pale oils. Unplanned shutdowns and supply disruptions affected several refineries and curbed naphthenic production in the second half of the year. The largest naphthenic refinery in Latin America was shut down for most of the year. A fire caused the refinery to shut down for repairs in late May. The refinery failed to restart after repairs were completed in late July because of a lack of sufficient crude supplies. This prompted more US supplies to move into Mexico and other Central American countries in the second half of the year. It also spurred more naphthenic supplies from Europe to move to the US to help to cover for the drop in production in Latin America in the second half of Several US naphthenic refineries had unplanned shutdowns or production cuts between late August and mid-october. These disruptions were caused by a lack of sufficient crude supplies because of a series of hurricanes in the US Gulf coast. The pale 60 premium to four-week average WTI crude prices stood at $47.54/bl in late December The premium was $5.54/bl higher than the $42/bl premium in late December US base oil exports, imports 000 bl US domestic SN 150 vs posted prices $/USG 5,000 4,000 Exports Imports Net imports EIA 3.50 US SN 150 ExxonMobil HollyFrontier Paulsboro 3, ,000 1, , ,000 Sep 16 Jan 17 May 17 Sep Dec Apr Aug Dec 17 US domestic N600 vs posted prices $/USG US SN 500 premium to heating oil $/USG US N600 Phillips 66 Chevron Motiva FHR Dec Apr Aug Dec Nymex heating oil front month = Dec Apr Aug Dec 17 Page 19 of 25

24 US 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 19 Oct Oct Oct Oct Oct Oct Oct Oct / Oct Oct Oct / Oct Nov Oct Bright stock 01 May Apr May Apr Group II * Phillips 66 Gulf coast Chevron Gulf coast Motiva Gulf coast FHR Gulf coast Effective $/USG ± Effective $/USG ± Effective $/USG ± Effective $/USG ± Jan Jan /80 12 Jan Jan / Jan Jan Jan Jan / Jan Jan Jan Jan Jan Jan Jan Jan Group II * ExxonMobil Gulf coast Calumet Shreveport Petro-Canada Mississauga Effective $/USG ± Effective $/USG ± Effective $/USG ± Oct na Nov Nov Oct na Nov / Aug Oct na Nov Oct na Oct na 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 25 Apr Oct na 70/80 01 May Apr Oct na 110/ Aug Group III * SK Lubricants Gulf coast Phillips 66 Gulf coast Petro-Canada Mississauga Effective $/USG ± Effective $/USG ± Effective $/USG ± 4cst 01 May Apr Oct na 6cst 01 May Oct na 8cst 01 May Apr Oct na Group II+ * Avista Oil midwest/east coast * Kleen Performance Products Effective $/USG ± Effective $/USG ± 110/ Oct Group II N Sep Oct Group III 4cst 17 Apr *the ± column shows the price difference between the current and previous posted price Page 20 of 25

25 US posted prices Group I * ExxonMobil Gulf coast HollyFrontier Paulsboro Refining east coast Calumet Shreveport Effective ± Effective ± Effective ± Effective ± 70/75 19 Oct Oct Oct Oct 17 1, Oct Oct Oct Oct / Oct Oct 17 1, Oct 17 1, / Oct 17 1, Nov 17 1, Oct 17 1, Bright stock 01 May 17 1, Apr 17 1, May 17 1, Apr 17 1, Group II * Phillips 66 Gulf coast Chevron Gulf coast Motiva Gulf coast FHR Gulf coast Effective ± Effective ± Effective ± Effective ± Jan Jan /80 12 Jan Jan / Jan Jan Jan Jan / Jan Jan Jan Jan Jan 18 1, Jan 18 1, Jan Jan Group II * ExxonMobil Gulf coast Calumet Shreveport Petro-Canada Mississauga Effective ± Effective ± Effective ± Oct na Nov Nov Oct na Nov 17 1, / Aug Oct na Nov 17 1, Oct na Oct na Group II+ * SK Lubricants Gulf coast Phillips 66 Gulf coast ExxonMobil Gulf coast Petro-Canada Mississauga Effective ± Effective ± Effective ± Effective ± 50/60 25 Apr 17 1, Oct 17 1, na 70/80 01 May 17 1, Apr 17 1, Oct 17 1, na 110/ Aug 17 1, Group III * SK Lubricants Gulf coast Phillips 66 Gulf coast Petro-Canada Mississauga Effective ± Effective ± Effective ± 4cst 01 May 17 1, Apr 17 1, Oct 17 1, na 6cst 01 May 17 1, Oct 17 1, na 8cst 01 May 17 1, Apr 17 1, Oct 17 1, na Group II+ * Avista Oil midwest/east coast * Kleen Performance Products Effective ± Effective ± 110/ Oct 17 1, Oct 17 1, Group II N Sep Group III 4cst 17 Apr 17 1, *the ± column shows the price difference between the current and previous posted price. The price is converted from the $/USG price. Refer to for methodology with the gallons-to-tonnes conversion factors. Page 21 of 25

26 maintenance and shutdowns Upcoming / recent base oil plant maintenance / shutdowns / closures Refiner Location Timing Capacity Capacity affected Cause SK-Repsol Cartagena, Spain Ely-Sep 2018 for 1 month 630,000 t/yr All Maintenance CNOOC Huizhou, China Sep 2018 for 45 days 400,000 t/yr All Maintenance SK-Pertamina Dumai, Indonesia Sep 2018 for 20 days 505,000 t/yr All Maintenance Hyundai-Shell Daesan, South Korea Aug ,000 t/yr All Maintenance Formosa Mailiao, Taiwan Jul/Aug 2018 for 45 days 600,000 t/yr All Maintenance Galp Porto, Portugal Ely-May to Mid-Jun ,000 t/yr All Maintenance Petronas Melaka, Malaysia 2H Mar 2018 for 30 days 300,000 t/yr All Maintenance S-Oil Onsan, South Korea 01 Mar 2018 for 3 weeks 41,000 b/d Partial, Group III Maintenance Rosneft Novokuibyshevsk, Russia Late-Mar 2018 for days 350,000 t/yr All Maintenance Rosneft/Gazpromneft Yaroslavl, Russia Late-Mar 2018 for days 350,000 t/yr All Maintenance SK-JX Nippon Ulsan, South Korea Mid-Mar 2018 for 1 month 1,300,000 t/yr NA Maintenance Bapco/Neste Bahrain 2H Mar 2018 for 2-3 weeks 400,000 t/yr All Maintenance Sinopec Gaoqiao, China Ely-Mar 2018 for 2 months 620,000 t/yr All Maintenance Imperial Oil Strathcona, Alberta, Canada End-Feb ,400 b/d All Closure Holly Frontier Tulsa, Oklahoma, US 20 Feb 2018 for 6-7 weeks 9,500 b/d Partial CDU maintenance LyondellBasell Houston, Texas, US Late-Jan 2018 for 3 weeks 4,600 b/d NA Maintenance San Joaquin Refining Bakerfield, California, US 26 Jan 2018 for 3 weeks 8,100 b/d NA Maintenance Calumet Princeton, Louisiana, US 1Q 2018 for 4-6 weeks 6,900 b/d NA Maintenance Sinopec Jingmen, China 2H Dec 2017 for 2 months 200,000 t/yr All, Group I Maintenance Avista Oil Peachtree, Georgia, US 02 Dec 2017 for 4-5 days 1,600 b/d All Maintenance Zibo-Xintai Shandong, China From Nov ,000 t/yr 100,000 t/yr Run-cut Formosa Mailiao, Taiwan Nov to 23 Dec ,000 t/yr Partial Refinery maintenance GS Caltex Yeosu, South Korea 1H Nov 2017 for 1 month 23,000 b/d NA Maintenance CNOOC Taizhou, China 1H Nov to 2H Dec ,000 t/yr All Maintenance Hainan Handi Hainan, China Nov 2017 to Ely Jan ,000 t/yr All Maintenance HPCL Mumbai, India 22 Nov to Ely Dec ,000 t/yr Partial, Group I Maintenance Pertamina Cilacap, Indonesia 22 Oct to 20 Nov ,000 t/yr Partial Maintenance HCC Indianapolis, Indiana, US 31 Oct 2017 for 3-4 days 2,500 b/d All Maintenance Chevron Pascagoula, Mississippi, US 07 Oct 2017 for 2 weeks 23,000 b/d All Hurricane contingency EGPC Alexandria, Egypt 01 Oct 2017 for 1 year 115,000 t/yr All Maintenance Calumet Shreveport, Louisiana, US Mid-Oct to 02 Nov ,000 b/d Partial Maintenance YPF La Plata, Argentina Ely-Oct to Mid-Dec ,700 b/d All Maintenance Valero Three Rivers, Texas, US 03 Oct 2017 for 1 month 2,400 b/d All Maintenance Gazpromneft Omsk, Russia Oct to Nov ,000 t/yr Partial CDU maintenance Holly Frontier Tulsa, Oklahoma, US 1H Oct 2017 for 2 weeks 9,500 b/d All Maintenance JX Nippon Mizushima A, Japan Mid-Sep to Mid-Nov ,000 t/yr All Maintenance ENI Livorno, Italy 12 Sep to 2H Oct ,000 t/yr All Flood repairs Tatneft Nizhnekamsk, Russia End-Sep to End-Nov ,000 t/yr All Technical issues Avista Oil Peachtree, Georgia, US 05 Sep 2017 for 5-6 days 1,600 b/d All Maintenance LyondellBasell Houston, Texas, US 29 Aug to Mid-Oct ,600 b/d All Feedstock shortage Motiva Port Arthur, Texas, US 29 Aug to 04 Oct ,000 b/d All Flood repairs ExxonMobil Baytown, Texas, US 27 Aug to 25 Sep ,000 b/d All Flood repairs Sepahan Isfahan, Iran 2H Aug to 2H Oct ,000 t/yr Partial Maintenance Naftan Novopolotsk, Belarus Ely-Aug to End-Sep ,000 t/yr Partial Maintenance Shandong Qisheng Shandong, China End-Jul 2017 for 1 month 120,000 t/yr All Maintenance Rosneft Angarsk, Russia 2H Jul to Late-Sep ,000 t/yr Partial CDU maintenance Avista Oil Kalundborg, Denmark From 24 Jul ,000 t/yr All Fire Formosa Mailiao, Taiwan 10 Jul 2017 for 3 weeks 600,000 t/yr Partial CDU repairs 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 Page 22 of 25

27 MARKet FundAMentALs Sep 2017 Industrial overview Lube/base oils overview Automobile sales Industrial growth Production Sales Import Export 000 Mom% Yoy% Yoy% 000t Mom% Yoy% 000t Mom% Yoy% 000t Mom% Yoy% 000t Mom% Yoy% China 2, Japan* Europe 1, US* 1, France Germany Italy Russia Spain Turkey UK Australia* India Singapore South Korea Taiwan* ^ Thailand* Argentina* Brazil* Mexico* * 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. ^ Taiwan lube production plus imports Global industrial growth Yoy% Global lubricating oils demand 000 t 10 US China Europe 700 US Germany Brazil Mar 16 Sep 16 Mar 17 Sep 17 0 Mar 16 Sep 16 Mar 17 Sep 17 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. Page 23 of 25

28 MARKet FundAMentALs Upcoming / recent expansions / conversions / new plants Refiner Location Timing New capacity Grade Expansion / New Modrica refinery Modrica, Bosnia NA 200,000 t/yr Group III Expansion Sasol Louisiana, US After 2020 NA GTL Cancelled HILL Chimkent, Kazakhstan ,000 t/yr Group I/II/III New Lub-rref Bangladesh Ltd Chittagong, Bangladesh Q ,000 t/yr Group II N70, N150, N500/600 re-refinery New ExxonMobil Singapore 2019 NA Group II Expansion VN Oil Hiep Phuoc, Vietnam After ,000 t/yr Group II re-refinery New Hainan Handi Hainan, China 2H mn t/yr Group II+/III New Hengli Petrochemical Dalian, China Q ,000t/yr Group II and III New Pemex Salamanca, Mexico ,300 b/d Group II Delayed ExxonMobil Rotterdam, Nether NA Group II New Holly Frontier Wood Cross, US ,000-12,000 b/d Group III Delayed Luberef Yanbu, Saudi Arabia 4Q ,000 t/yr Group II New Panjin Northern Asphalt Liaoning, China 2H Nov ,000 t/yr Naphthenic base oils New Neste NA By ,000 t/yr Group III Expansion Slavneft Yaroslavl, Russia 2Q ,000 t/yr Group III New Petrobras Comperj, Brazil ,000 t/yr Group II Cancelled S-Oil Onsan, South Korea Dec ,000 t/yr Grp II N500 Conversion CNOOC Taizhou, China Oct ,000 t/yr Group II New Ergon Refining Vicksburg, US 3Q ,000 b/d Group I bright stock New Shandong Qingyuan Shandong,China Jun ,000 t/yr Group II New Sinopec Maoming, China Jun ,000 t/yr Group II+, Group III Expansion Adnoc Abu Dhabi, UAE Apr ,000 t/yr 500,000 t/yr Group III, 120,000 t/yr Group II New Jinling Petrochemical Nanjing, China Mar ,000 t/yr Group II New ExxonMobil Singapore 1Q ,000 t/yr Group II Expansion ExxonMobil Baytown, US 1Q ,000 t/yr Group II Expansion NIS, Serbia Serbia ,000 t/yr Group II/naphthenic Cancelled Nynas Harburg, Germany 2015 NA 350,000 t/yr naphthenic base oils Conversion/expansion Sinopec Yanshan, China ,000 t/yr Group II Expansion Tatneft Nizhnekamsk, Russia Dec ,000t /yr Group II/III New SK Lubricants/Repsol Cartagena, Spain 20 Sep ,000 t/yr Group III 3-8cst New Shell/Hyundai Oilbank Daesan, South Korea Aug-Sep ,000 t/yr Group II New Hengrunde Petrochemical Shandong,China Aug ,000 t/yr Group II New Chevron Pascagoula, US July-Aug mn t/yr Group II New Heritage-Crystal Clean Indiana, US Mid mn USG/yr Re-refined Group II light and mid-grade Expansion Naftan Novopolotsk, Belarus May ,000 t/yr Group I Conversion Southern Oil Queensland, Australia Mar mn l/yr NA New Shandong Qingyuan Shandong, China Early ,000 t/yr Group I+ New Puralube Troeglitz, Germany ,000 t/yr Group II New FCC Environmental Baltimore, US ,000 b/d Group II re-refinery New Hebei Feitian Petrochemical Hebei, China Q ,000 t/yr Group II New Panjin Northern Asphalt Liaoning, China Oct ,000 t/yr Group II Expansion S-Oil Onsan, South Korea Oct ,000 b/d Group III Expansion SK Lubricants Ulsan, South Korea Jun ,000 b/d Group II heavy-grade, from Group III Conversion Avista Oil (US) Peachtree, Georgia, US May ,000 b/d Group II New Lwart Lencois Paulista, Brazil Jan ,000 t/yr Group II re-refinery New Sinopec Jinan, China 4Q ,000 t/yr Group II and BS, from 100,000 t/yr Group I Conversion/expansion Naftan Novopolotsk, Belarus Nov 2012 NA Add 6,000 t/month Group III Conversion Lotos Gdansk, Poland 2H 2012 NA Add Group II Conversion 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 Page 24 of 25

29 About ARGUs Base Oils Transparent methodology A full description of our methodology is available on our website at You will also find our journalistic ethics policy, a history of Argus, and other useful reference material. Argus Base Oils forward prices methodology Argus assesses forward base oils prices by applying the intermonth premiums or discounts of the 30-day average of each forward month for gasoil or heating oil futures to the fob Asia / European export / US SN 500 physical base oil price as published in Argus Base Oils every week. Argus Base Oils forward premium methodology Argus assesses the forward base oil premium to gasoil or 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 available at Argus Base Oils Outlook A monthly forecast of key base oils prices spanning 12 months into the future. Key benefits: Facilitates short-term planning/budgeting Provides third-party reference price to measure against internal price targets Reduces exposure to spot price volatility Click here to request a complimentary issue! Or us: Sales@argusmedia.com Petroleum illuminating the markets Market Reporting Consulting Events Argus Base Oils is published by Argus Media group Registered office Argus House, 175 St John St, London, EC1V 4LW Tel: Fax: sales@argusmedia.com ISSN: Copyright notice Copyright 2016 Argus Media group All rights reserved All intellectual property rights in this publication and the information published herein are the exclusive property of Argus and/or its licensors (including exchanges) and may only be used under licence from Argus. Without limiting the foregoing, by accessing this publication you agree that you will not copy or reproduce or use any part of its contents (including, but not limited to, single prices or any other individual items of data) in any form or for any purpose whatsoever except under valid licence from Argus. Further, your access to and use of data from exchanges may be subject to additional fees and/or execution of a separate agreement, whether directly with the exchanges or through Argus. Trademark notice ARGUS, the ARGUS logo, ARGUS MEDIA, Argus Base Oils, other ARGUS publication titles and ARGUS index names are trademarks of Argus Media Limited. Visit for more information Disclaimer The data and other information published herein (the Data ) are provided on an as is basis. Argus and its licensors (including exchanges) make no warranties, express or implied, as to the accuracy, adequacy, timeliness, or completeness of the Data or fitness for any particular purpose. Argus and its licensors (including exchanges) shall not be liable for any loss, claims or damage arising from any party s reliance on the Data and disclaim any and all liability related to or arising out of use of the Data to the full extent permissible by law. Publisher Adrian Binks Global compliance officer Jeffrey Amos Commercial manager Jo Loudiadis Managing editor Jim Kennett Editor Iain Pocock Tel: baseoil@argusmedia.com Customer support and sales: Technical queries technicalsupport@argusmedia.com All other queries support@argusmedia.com London, UK Tel: Astana, Kazakhstan Tel: Beijing, China Tel: Dubai Tel: Moscow, Russia Tel: Rio de Janeiro, Brazil Tel: Singapore Tel: Tokyo, Japan Tel: Argus Media Inc, Houston, US Tel: Argus Media Inc, New York, US Tel: Petroleum illuminating the markets

30 Argus Base Oils Services About Argus Argus is the leading independent agency for price reporting, news and analysis for base oils, as well as international energy, petrochemicals, fertilizer and metals markets. Argus prices are used by market participants as indexes in physical contracts and as benchmarks in derivatives contracts. Our services Argus Base Oils Outlook A short-term forecast of key base oils prices spanning 12 months into the future. Argus Base Oils A weekly market service that provides spot and posted prices, market news and analysis of the global base oils market. Argus China Base Oils A weekly market service that provides spot and posted prices, market news and analysis of the Chinese base oils market. Published in Chinese Mandarin. Argus Americas Base Oils A weekly market service that provides spot and posted prices, market news and analysis of the Americas base oils market. Argus Base Oils Outlook Overview Argus Base Oils Outlook, published monthly, uses a proprietary short-term model to forecast future prices by identifying and quantifying the relationships between a set of price determinant variables. It taps Argus coverage and data of the global base oils spot market and fundamentals to facilitate the analysis of its forecasts. Each base oils price forecast uses a different model. This captures the unique price dynamics of each group/grade of base oil with their most appropriate and influential price determinants. Key Determinants Historical prices Historical base oil prices capture the latest price formation dynamics in the market. This provides a good indicator of how prices are going to behave in the near term and incorporates factors such as seasonality. Supply schedule Short-term supply shocks like planned or unplanned shutdowns or temporary increases in run-rates can have a profound impact on short-term prices. Argus uses its extensive global market-feedback channels and research-coverage to maintain an up-to-date base oil supply database at country, plant and viscosity level. Crude, gasoil, diesel prices and crack spreads Relevant crudes prices, and oil products like vacuum gasoil and diesel, have an impact on base oil prices. Argus incorporates this determinant using its extensive database of global spot crude and oil product prices. Key Features Facilitates short-term planning/budgeting Reduces exposure to spot-market volatility Provides a third-party reference-price to measure against internal price-targets Copyright 2018 Argus Media Group

31 Argus Base Oils Overview Argus Base Oils provides weekly base oils spot prices, posted prices, and market analysis for all the key markets globally as well as valuable price analytics information on base oil premiums to VGO, crude, and gasoil. Argus Base Oils is the only market service to capture the full spectrum of base oils trade in the international market in a single report. Key Features Weekly market spot price assessments and analysis for Group I, II, and III base oils in key global markets Daily market-moving news Historical data Transparent market-appropriate methodology Daily updates of forward curves and profit margins for base oils production Detailed economics and profitability data and analysis from a global leader in petroleum indexation Spot prices reflecting current market price Argus believes in robust and accurate spot prices as the best way for an open market to work efficiently. A spot price is an open-market price negotiated between buyers and sellers. Prices that flat-line, or change infrequently, lag the market. This has repercussions: Lagging prices send inappropriate signals to buyers and sellers alike, exacerbating market risk Lagging prices freeze the market, when they do not change for an extended period Lagging prices freeze liquidity, exacerbating peaks and troughs Delivery of service Argus Base Oils is delivered on Argus Direct. Argus Direct is the next generation platform from Argus Media. It is the premium way to access our reports, prices, market insight, fundamentals data and news. Argus Direct can be accessed on your personal computer, ipad and iphone. Argus Direct is fully customisable and allows access to: Publications: Current and historical issues Prices: Customise your workstation to see your key prices Charts: create charts to monitor compare data News and analysis: Highlights key stories Data and downloads: Instant access to fundamental data Alerts: Receive alerts on key prices and articles on your desktop, mobile and Contact us for more information about Argus Base Oils Services: Singapore@argusmedia.com Argusmedia.com/Oil-Products/Argus-Base-Oils/ Copyright 2018 Argus Media Group