U.S. Base Oil Price Report

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Calumet communicated a price increase for its naphthenic base oils, joining Cross Oil, which announced a similar initiative a week ago. On the paraffinic front, Chevron increased its posted prices on Oct. 19, but so far the company appears to be the only producer to have revised postings, following several months without any adjustments.

Calumet announced a price increase of 20 cents per gallon on all naphthenic base oil grades, effective Nov. 3. The initiative came on the heels of Cross Oil’s 20-cent increase announcement, which called for the company’s prices to be adjusted up on Nov. 4.

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Both initiatives were fueled by increases in crude oil, natural gas and other raw materials, along with climbing costs in transportation, labor, and other expenses.

Most producers on the naphthenic as well as the paraffinic side reported fairly

healthy demand against lean inventories. However, a number of suppliers also acknowledged that orders had weakened in October, as expected at the start of the last quarter of the year, but inventories were still comparatively lower than at this time in years past, which exerted pressure on pricing.

Demand for naphthenic grades from South America has weakened, allowing for more domestic cargoes to become available and resulting in downward pressure on values.

Current and upcoming maintenance programs were expected to squeeze naphthenic supply further, although most producers planned to build inventories to cover the shortfall during the shutdowns. Cross Oil recently completed a brief shutdown and a catalyst change at its Smackover, Arkansas, naphthenic base oils plant. Ergon began a planned maintenance event at its naphthenic refinery in Vicksburg, Mississippi, on Oct. 23, which was expected to last between seven and 16 days. Calumet has slated a turnaround for one to two weeks at its Princeton, Louisiana, plant in early November as well, following a slight one-week delay. Next year, San Joaquin Refining plans to start a three-week maintenance shutdown at its plant in Bakersfield, California, on Feb. 1.

On the paraffinic base oils front, the market was swayed by conflicting currents, as generally tight supply of the heavier grades placed pressure on prices, but softer requirement levels and improved availability had resulted in lower spot indications. However, producers said that demand for November volumes was very promising and would likely surpass October levels. “Sales were down in October, but they are looking better for November so far,” a source noted. Business may also be slowing down towards the end of the month on account of the Thanksgiving holiday, sources conceded.

Two weeks ago, Chevron communicated posted price increases of 15 cents per gallon for its Group II 100R cut, 12 cents/gal for its 220R base oil and 20 cents/gal for its 600R cut, effective Oct. 19. While other producers were considering potential price adjustments, no other suppliers had communicated changes by press time.

Reports that Chevron would be idling production of base oils to complete maintenance work at its Pascagoula, Mississippi, refinery in the first quarter of 2022, had circulated last week. This week, it was heard that the turnaround may be postponed by a few weeks to the second quarter of 2022, although the production information could not be confirmed with the producer directly. The Pascagoula plant has a capacity of 25,000 barrels per day of API Group II base oils, according to Lubes’n’Greases Base Stock Plant Data.

A second U.S. Gulf producer was also heard to be starting a minor maintenance event in the next few weeks and plans to delay a longer turnaround until the second or third quarter of 2022.

A key Group II producer has also slated a turnaround and catalyst change for the third quarter of 2022.

A Group I producer is currently completing a turnaround, which began on Oct. 16 and is expected to be wrapped up in the next few days.

While a majority of producers were focusing on meeting contractual obligations, a few have embarked on spot export transactions to find a home for surplus supplies of certain grades. A number of U.S. light-viscosity base oil cargoes were heard to have been sold to Mexican and Indian buyers. These transactions were completed at lower values than domestic indications.

Several parcels of light grades had also been concluded from Asia and Europe to move to the U.S. Gulf and Mexico in recent months, and these cargoes arrived in September and October. The shipments were the result of oversupply conditions and falling prices in other regions, and were booked in addition to several U.S. cargoes. This had exerted downward pressure on prices in Mexico. However, with base oil prices stabilizing in Europe, fewer cargoes were anticipated to be offered for export as numbers may no longer work, particularly given recent increases in freight costs. Logistical issues and uncertainties regarding shipments from Asia thwarted sales to distant destinations like the U.S., sources commented.

Group III supplies have become more easily obtainable, since production in Asia and Europe has returned to normal levels, while demand in those regions has softened. Buying interest from U.S. consumers remains strong, but the lengthening availability was exerting pressure on pricing.

While lubricant and finished products demand remained surprisingly strong, supply chain issues and raw material shortages continued to hamper the smooth operation of many downstream manufacturing facilities. This has led to a decrease in base oil consumption.

Lubricant and grease producers also faced mounting costs for raw materials, packaging, logistics, and labor, which prompted several of them to communicate price increases between 5% and 10% for November implementation. An additive manufacturer has also announced an 8% price markup, with an effective date of Nov. 1.

Upstream, crude futures slipped below $85 per barrel on Tuesday morning ahead of weekly U.S. supply reports, which were expected to reflect a rise in crude inventories. However, prices ticked up slightly later in the trading session as supply was expected to remain tight in coming months while the world economies recover from the pandemic. Numbers were pressured by expectations that OPEC+ members, who will be meeting on Thursday, will stick to their plans of increasing production gradually. BP said on Tuesday that the company will ramp up investments in its onshore U.S. shale oil and gas business in 2022, showing confidence in shale oil’s potential.

On Nov. 2, West Texas Intermediate December futures settled at $83.91/barrel, from $84.65/barrel on Oct. 26.

Brent futures for January delivery settled at $84.72/barrel on the CME on Nov. 2, compared to $86.40/bbl for December futures on Oct. 26.

Light Louisiana Sweet crude wholesale spot prices were hovering at $84.28/barrel on Nov. 1 and had settled at $84.94/bbl on Oct. 25, according to the Energy Information Administration.

Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.

Lubes’n’Greases Publications shall not be liable for commercial decisions based on the contents of this report.

Historic and current base oil pricing data are available for purchase in Excel format.

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