U.S. Base Oil Price Report

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Base oil producers responded to the unexpected drop in crude oil pricing last week by rescinding part of their announced posted price increases, although most of the adjustments for API Group III base oils were upheld. The markups had originally been intended to recoup margins because crude oil futures had skyrocketed as they reacted to the ongoing Russian war on Ukraine and a United States ban on Russian crude oil, natural gas and coal imports, among other factors.

Sources explained that refinery economics had dictated that base oil prices be propped up to justify their output versus the option to stream feedstocks into fuel production, as fuel prices had shot up and were competing with base stock numbers.

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However, crude oil prices started a retreat early last week, relieving some of the pressure on base oils, as markets awaited news on diplomatic talks between Russia and Ukraine and hoped for a conflict resolution. China’s COVID-19-related lockdowns also caused concern that the country would be consuming less crude oil than anticipated, placing downward pressure on oil prices.

According to reports, ExxonMobil was the first producer to retract the full 70 cents per gallon increase that the company had intended to implement on March 14. The 70 cents/gal increase on API Group I SN115 grade was reduced by 30 cents/gal, while the increase on the rest of its Group I cuts and its Group II and Group II+ grades was adjusted down by 45 cents/gal, effective March 18.

HollyFrontier revised its plan to raise the price of its Group I base oils by a full 40 cents/gal across the board on March 21. The company rescinded 30 cents/gal of the markup intended for the Group I SN70, SN100 and SN150 grades (which means that the actual increase will be 10 cents/gal) and 40 cents/gal on the remainder of its Group I base oil offerings. The 30 cents/gal increase that went into effect on March 14 remained intact.

Petro-Canada rescinded the 40 cents/gal increase on Group II and Group II+ postings across the board announced last week. The company implemented a Group III increase of 60 cents/gal, effective March 21, which was already reflected in the Price Table below. Petro-Canada had not announced a markup on Group III grades during the previous round of increases.

Calumet revised its increase initiative as well. The company retracted its increase of 20 cents/gal on its Group I SN600 and 40 cents/gal on bright stock, but its Group II 75/80 to 325 vis grades moved up 15 cents/gal on March 21 as shown in the Price Table. Calumet had previously 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.

Paulsboro was also expected to repeal part of its 70 cents/gal increase, which was originally scheduled to go into effect on March 17. The producer reduced the markup on its Group I SN100 grade by 30 cents/gal, while the increase on the rest of its Group I base oils was lowered by 45 cents/gal, effective March 23.

A couple of suppliers had not communicated price increases last week, but they stepped out with fresh initiatives this week.

SK Lubricants Americas will be raising the price of its Group II+ 70N cut by 40 cents/gal and all of its Group III grades by 55 cents/gal with an effective date of March 24.

Avista Oil announced an increase of 50 cents/gal on its Group II+ ESR 50 grade and 60 cents/gal on its Group III ESR T-5 base oil, effective March 18. The company noted that the increase was due to changing fundamentals including unprecedented cost inflation to source feedstock and produce base oils, coupled with firm demand.

Among those who had announced posted price increases last week, Chevron lifted its API Group II 100R and 220R grades by 20 cents per gallon, and its 600R cut by 15 cents/gal as of March 15. This followed an announcement that had called for a 35 cents/gal markup across the board, effective March 8.

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 during the previous round of price hikes.

Excel Paralubes raised the posted price of its Group II Pure Performance grades by 20 cents/gal across the board on March 16. This came in addition to the 30 cents/gal increase that went into effect on March 9.

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, following a 30 cents/gal and 35 cents/gal markup for these grades implemented on March 9.

Most producers reported fairly balanced to tight inventories, as demand has picked up due to the start of the spring production cycle and some refiners opted for diverting more feedstocks into fuel production. A Group I producer was also preparing for a brief turnaround. The lighter grades continued to be reported in tighter positions than their heavier counterparts.

Suppliers have also concluded a number of export transactions to Mexico and South America, where demand has shown an uptick. Although the recent price increases were turning U.S. exports less competitive and Group I suppliers reported very limited spot availability, buyers appeared willing to accept higher numbers. Northeast Asian suppliers have made incursions into the Americas, with at least one base oils cargo expected to be shipped from Mailiao, Taiwan, to Brownsville, Texas, in late April, likely for onward shipment to Mexico.

Group III supply remained adequate to strained, depending on the grade. The 4 centiStoke and 6 cSt showed less availability than the 8 cSt, and there appeared to be no issues with imports for the time being, despite scheduled turnarounds at base oil plants in South Korea and the Middle East. Demand for Group III base oils was partly dampened by production cutbacks in downstream lubricant segments prompted by a lack of raw materials such as additives.

On the naphthenic side, business continued to be reported as steady, with some grades tightening due to recent turnarounds at Valero’s and San Joaquin Refining’s base oil plants and a turnaround at Cross Oil’s refinery, along with spiking demand from buyers eager to beat potential price adjustments as values remained exposed to upward pressure.

Naphthenic base oil producers Cross Oil, Calumet, Ergon and San Joaquin raised all naphthenic base oil prices by 35 cents/gal between March 11 and March 14, driven by the rising costs of crude oil, natural gas, transportation and labor.

The successive rounds of base oil increases seen in recent weeks and other climbing costs prompted markups in downstream segments as well. Several independent lubricant manufacturers, as well as a number of majors, announced a round of increases of up to 18% on finished lubricants to be implemented between March 1 and March 28. Several suppliers will increase prices on finished products by up to 15% to 25% between April 1 and April 15. Chevron was heard to have rescinded its price increase scheduled to go into effect on March 28 and communicated a price hike of up to 30% instead, effective on the same date.

Additionally, additive producers have also announced fresh price increases, driven by the steeper cost of raw materials, energy and transportation. A major lubricant additive producer communicated an increase of up to 15%, effective March 31. A second additive manufacturer announced markups of up to 15% to be implemented on April 15. A third additive supplier intends to raise prices by 12% (depending on terms and other conditions) on April 18. Additive producers had previously introduced price increases of up to 15% between Jan. 31 and Feb. 21.

Downstream prices were also feeling the impact of highly volatile crude oil and fuel values. Crude oil futures were again on a rollercoaster ride during the week and jumped by more than 7% on Monday as members of the European Union discussed whether to issue an embargo on Russian oil and gas during meetings with U.S. President Joe Biden. However, futures slipped on Tuesday as it became apparent that the European Union would not be able to reach an agreement. The EU and its allies have already imposed a number of other sanctions against Russia, including a freeze on its central bank’s assets.

On March 22, West Texas Intermediate (WTI) April futures settled at $111.76/barrel, compared to $96.44/barrel on March 15.

Brent futures for May delivery settled at $115.48/barrel on the CME on March 22, from $99.91/bbl on March 15.

Louisiana Light Sweet crude wholesale spot prices were hovering at $114.24/barrel on March 21 and had settled at $105.97/bbl on March 14, 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.