U.S. Base Oil Price Report

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More United States base oil producers announced posted price increases this week, which will be implemented in addition to the markups that went into effect between March 8 and March 14. According to sources, the increases were necessary due to the meteoric rise in crude oil prices and the need for producers to maintain margins to justify base oil production versus fuels output. The ongoing conflict in Ukraine and additional international sanctions on Russia were expected to keep up the pressure on energy prices.

Chevron communicated a posted price increase of 20 cents per gallon for its API Group II 100R and 220R grades, and 15 cents/gal for its 600R cut, which will go into effect on March 15 “to reflect current market conditions,” the company noted. This follows an announcement made the previous week that called for a 35 cents/gal markup across the board, effective March 8.

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Motiva increased the posted price of its Group II base oils by 50 cents/gal and its Group III grades by 60 cents/gal as of March 15. The company had not issued any adjustments last week.

HollyFrontier plans to raise the price of its Group I base oils by 40 cents/gal across the board on March 21. This follows a 30 cents/gal increase that went into effect on March 14.

Petro-Canada will lift the price of its Group II and Group II+ base oils by 40 cents/gal on March 21. This initiative also comes on the heels of a previous increase of 30 cents/gal, effective March 14. This time around, Petro-Canada also intends to increase its Group III cuts by 60 cents/gal, effective March 21.

Calumet communicated a 20 cents/gal increase on its Group I SN600 cut and 40 cents/gal on its bright stock; the company’s Group II 75/80 to 325 vis grades will be raised by 15 cents/gal as of March 21. Previously, the company lifted posted prices for its Group I 600 vis and bright stock grades by 30 cents/gal and its Group II 75/80 to 325 vis cuts by 35 cents/gal on March 11.

Excel Paralubes will be raising the posted price of its Group II Pure Performance grades by 20 cents/gal across the board, effective March 16. This comes in addition to the 30 cents/gal increase communicated last week, which went into effect on March 9.

Paulsboro will be increasing its Group I base oils by 70 cents/gal, effective March 17.

Safety-Kleen increased its Group II+ 120 grade by 20 cents/gal, and its Group II+ 240 cut by 25 cents/gal on March 15, in addition to the 30 cents/gal and 35 cents/gal, respectively, announced late last week, that went into effect on March 9.

ExxonMobil was reported to have originally communicated an increase of 30 cents/gal for its Group I, Group II and Group II+ base oils. Subsequently, the producer raised the amount of the increase to 70 cents/gal for all grades, keeping the same effective date of March 14. The increase amount revision was thought to have been triggered by the sudden jump in crude oil prices after President Biden’s announcement of a U.S. ban on Russian crude oil imports.

The successive price increases were said to have been mainly driven by the surge in crude oil prices over the last two weeks, which intensified a rising crude price trend that had been observed since the beginning of the year.

A source explained that the reason for the consecutive increases was the rapid run-up in crude oil pricing, and the accompanying increases in gasoline and especially diesel and jet values. Refineries ultimately make economic decisions based on alternate values and the “crack spread” for base oils had declined precipitously as it remained at the prior quarter’s levels, the source added. Base oils were basically no longer competitive with high value fuels and this prompted producers to seek the increases communicated last week and this week.

Naphthenic base oil producers have implemented increases as well, driven by similar conditions as the paraffinic markups.

Cross Oil and Calumet raised all naphthenic base oil prices by 35 cents/gal, with an effective date of March 11.

Ergon and San Joaquin also lifted prices by 35 cents/gal, but the increases went into effect on March 14.

Aside from receiving support from the mounting cost of crude oil, natural gas, transportation and other factors, the naphthenic base oil increases were propped up by a fairly tight supply and demand balance due to recent plant maintenance programs.

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 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 consecutive base oil increases and other rising costs prompted markups in downstream segments as well. 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. Safety-Kleen will increase prices up to 20% on all lubricants and related products as of April 1. Some of these price hikes come on the back of previous initiatives implemented in February.

Two major additive producers introduced price increases of 15% on Jan. 31 and Feb. 21, respectively, and further adjustments were being considered, according to sources.

A lack of truck drivers, logistical and transportation disruptions, and a shortage of raw materials such as additives and certain packaging materials continued to impact manufacturing operations, with some allocation programs still in place.

Meanwhile, there appeared to be no relief from the persistent climb in crude oil and fuel prices, as the conflict in Ukraine intensified. The price of gasoline in the U.S. was hovering at a record average of $4.32 per gallon as of Tuesday evening, with some states, including Alaska and California, paying average prices of as much as $4.73 and $5.75 respectively, according to the AAA. However, with crude futures easing this week, there were expectations that fuel prices would retreat as well.

President Volodymyr Zelensky of Ukraine was expected to address the U.S. Congress in a virtual speech on Wednesday, in hopes of gaining support for the U.S. to send fighter jets to Ukraine, The New York Times reported on March 15. The prime ministers of the Czech Republic, Poland and Slovenia traveled by train to Kyiv, Ukraine’s capital, on Tuesday to express the European Union’s support for Ukraine. Next week, President Biden will travel to Brussels to attend a special NATO meeting about the war.

There were also reports suggesting that China might be open to providing Russia with assistance in its campaign to take over Ukraine.

Crude oil futures remained very volatile, with numbers tumbling on Monday and Tuesday to levels below $100 per barrel as markets awaited the outcome of talks between Russia and Ukraine. Prices were also weighed down by new COVID-19 lockdowns in China, which is a huge crude oil consumer.

On March 15, West Texas Intermediate (WTI) April futures settled at $96.44/barrel, compared to $123.70/barrel on March 8.

Brent futures for May delivery settled at $99.91/barrel on the CME on March 15, from $127.98/bbl on March 8.

Louisiana Light Sweet crude wholesale spot prices were hovering at $105.97/barrel on March 14 and had settled at $121.31/bbl on March 7, 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.