EDITOR’S NOTE: This is an updated version of the Base Oil Price Report published earlier, which now includes a change in ExxonMobil’s posted price initiative as detailed below.
Sky-high crude oil prices precipitated an avalanche of base oil price initiatives, both on the paraffinic and the naphthenic sides of the market – the second round of markups in less than a month. An escalation of Russian attacks on Ukraine prompted a United States ban on Russian oil and natural gas imports, which stoked existing concerns about a global energy supply shortage and sent crude oil values to 13-year highs.
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Late last week, reports started to circulate that ExxonMobil intended to raise posted prices on all of its API Group I, Group II and Group II+ base oils by 30 cents per gallon on March 14. Subsequently, the company was reported to have raised the amount of the increase to 70 cents/gal for all grades, keeping the same effective date of March 14. This was thought to be due to the sudden jump in crude oil prices after President Biden’s announcement of a U.S. ban on Russian crude oil imports.
Chevron announced a posted pricing increase of 35 cents/gal across the board, effective March 8, “to reflect current market conditions,” the company
Excel Paralubes communicated a posted price increase of 30 cents/gal for its Group II Pure Performance 70N, 110N, 225N and 600N base oils, effective March 9.
Calumet informed its customers that the company would be lifting posted prices with an effective date of March 11, with its Group I 600 vis and bright stock grades increasing by 30 cents/gal and its Group II 75/80 to 325 vis cuts moving up by 35 cents/gal.
HollyFrontier announced a price increase of 30 cents/gal for its Group I grades, which will go into effect on March 14.
Petro-Canada will also be increasing prices for all of its Group II and Group II+ base oils by 30 cents/gal as of March 14, but the company’s Group III prices will remain unchanged.
Paulsboro was expected to raise its Group I postings by 30 cents/gal on March 17. The company’s prices will be revised on the table below next week, which is when the adjusted values will be going into effect.
The increase announcements sent buyers into the market to secure orders before the markups went into effect. This partly clouded assessments about the real demand levels, sources commented.
The domestic market has tightened as buying interest for the light grades had picked up the pace over the last couple of weeks ahead of the spring production cycle, while some refiners were heard to have dialed down base oil production rates given steep fuel prices and a need to favor distillates output.
Demand from export markets has also been steady and even though spot export prices had been on a downward trend, the crude oil price jumps have thwarted further erosion. Participants said that spot prices into Mexico, for example, had bottomed out and were once again on the way up.
Naphthenic base oil producers have announced increase initiatives as well, driven by similar conditions as the paraffinic markups.
Cross Oil planned to increase prices by 35 cents/gal on all grades of naphthenic base oils, effective close of business on March 11. “This increase is being driven by market factors including the recent unprecedented increases in crude oil, natural gas, and continued inflationary pressure on other inputs,” the company explained in a letter to customers. The producer will limit orders to contract quantities during the transitional period and may limit sales based on available inventory.
Calumet will also be increasing all of its naphthenic base oils by 35 cents/gal, effective March 11.
Ergon announced an increase in pricing of naphthenic oils in the North American market of 35 cents/gal, which will go into effect on March 14. The increase will apply to all viscosities.
San Joaquin Refining will be raising prices by 35 cents/gal on March 14 as well.
Supply in the naphthenic base stocks segment has been fairly tight due to recent plant maintenance programs, coupled with steady demand.
Valero was understood to have wrapped up a turnaround at its naphthenic plant earlier this month. The Three Rivers, Texas, unit can produce 2,400 b/d of naphthenic base oils, according to Lubes’n’Greases’ Base Oils Plant Data.
San Joaquin started a turnaround at its Bakersfield, California, refinery on Feb. 12 and resumed production over the weekend, on March 5, as planned. The producer’s inventory was heard to be depleted as it continued to cover requirements during the outage, and it may take some time for stocks to be rebuilt. San Joaquin’s naphthenic base oils unit has a nameplate capacity to produce 8,100 barrels per day.
The previous round of base oil increases, which raised prices by 20, 25, 30 and 35 cents/gal, depending on the grade and the supplier, between Feb. 15 and March 1 triggered increases in downstream segments as well. Two major additive producers had previously announced that they would be increasing prices by 15% on Jan. 31 and Feb. 21, respectively, adding to the pressure.
Several independent lubricant manufacturers, as well as a number of majors, announced increases of up to 18% on finished lubricants to be implemented between March 1 and March 28.
The base oil price increases announced this week were expected to squeeze lubricant margins further, with blenders already discussing plans to reassess their pricing structure once again.
Aside from the persistent price pressure, a lack of truck drivers, logistical and transportation issues, and a shortage of raw materials such as additives and certain packaging materials continued to plague manufacturing operations. Some finished lubricant manufacturers have resorted to allocation programs on certain products to manage orders and inventories. Several products were absent from store shelves for the first time in years, sources noted.
Meanwhile, all eyes were on crude oil and feedstock prices, as their rapid ascent not only continued to erode base oil producers’ margins, but also affected all aspects of everyday life. The price of gasoline in the U.S., for example, has broken previous records and was hovering at an average of $4.17 per gallon as of Tuesday evening. The situation was expected to turn even more serious as President Biden’s administration decided to ban Russian oil imports and was working with European allies to impose similar restrictions.
The ban was a decision “they’re not taking lightly, as it could have tremendous financial repercussions that will be felt in every corner of the globe for years to come. In fact, some even predict that higher oil prices could trigger a recession in some of the world’s biggest economies,” warned Michael Scott of OilPrice.com.
Crude oil futures jumped by as much as 7% during Tuesday’s trading session as President Biden announced the ban on Russian fossil imports in response to Russia’s invasion of Ukraine.
“We made this decision in close consultation with our allies and partners around the world, particularly in Europe,” Biden said in a press conference, according to CNBC.com. “We are working closely with Europe and our partners to develop long term strategy to reduce their dependence on Russia.”
On March 8, West Texas Intermediate (WTI) April futures settled at $123.70/barrel, compared to $103.41/barrel on March 1.
Brent futures for May delivery settled at $127.98/barrel on the CME on March 8, from $104.97/bbl on March 1.
Louisiana Light Sweet crude wholesale spot prices were hovering at $121.31/barrel on March 7 and had settled at $98.73/bbl on Feb. 28, 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.
Archived base oil price reports can be found through this link: https://www.lubesngreases.com/category/base-stocks/other/base-oil-pricing-report/
Historic and current base oil pricing data are available for purchase in Excel format.