U.S. Base Oil Price Report

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Several base oil producers communicated posted price increases this week, thought to have been prompted by steep crude oil prices, along with prospects of tightening vacuum gas oil feedstock availability and rising production costs. A snug supply and demand scenario was lending additional support to posted prices, particularly in the case of the API Group II grades.

Late last week, Motiva implemented a posted price increase of 15 cents per gallon on its API Group II aramcoPRIMA 220 cut and 25 cents/gal on its aramcoPRIMA 600 cut, with an effective date of April 15.

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Chevron communicated a 20 cents/gal posted price increase on all of its Group II grades, with an effective date of April 19, “to reflect market conditions,” the company explained.

According to reports, ExxonMobil intends to increase its Group I CORE base oils by 20 cents/gal across the board, its Group II EHC 65 grade by 30 cents/gal, and its Group II+ EHC 45 grade by 20 cents/gal with an effective date of April 20.

Excel Paralubes also announced a 20 cents/gal posted price increase for its Group II Pure Performance base oils, which will go into effect on April 20.

Calumet communicated a price increase of 20 cents/gal on all Calpar paraffinic base oils, effective April 25.

Paulsboro will be increasing all of its Group I prices by 20 cents/gal on April 25.

Market participants reiterated that given the current sanctions on Russian exports over its war in Ukraine, VGO might be in short supply in coming months as Russia is a large exporter of the feedstock and many barrels come to the United States, but this will change as of this month. The import restrictions and the limited alternative sources of VGO would place upward pressure on VGO pricing, sources noted.

Additionally, crude oil prices have shown sharp fluctuations in recent weeks and continued to hover at firm levels, exerting pressure on fuel prices and prompting producers to seek base oil price hikes in order to justify base oil output versus fuel production. These were some of the fundamentals that had also triggered consecutive posted price adjustments in March. Market players said that the Group II segment was particularly tight now, and that this had partly prompted the price adjustments. Europe was also seeing strained supplies of most grades, but export volumes available from the U.S. were also limited. Extra barrels of base oils appeared to be sparse in all regions, including Asia.

There were expectations that Russian crude barrels, which traders were by and large avoiding even though they have not been officially banned by the European Union and other nations, would be difficult to replace, particularly as OPEC+ members appeared unwilling to increase output levels.

During the previous round of base oil price increases, U.S. paraffinic base oil suppliers implemented posted price increases of 10 cents/gal to 40 cents/gal between March 18 and March 23 meant to offset skyrocketing crude oil prices on the back of U.S. bans on Russian oil and gas imports and other sanctions. There continued to be discussions about the possibility that the EU would ban Russian crude oil imports as well. European officials were drafting a phased import ban on Russian oil products, but the measure will likely not be implemented until after the second round of the French elections on April 24 at the earliest, The New York Times reported. Natural gas prices were also climbing in the U.S. – high heating demand triggered by unusually cold weather in the Northeast sent natural gas futures soaring on Monday to levels not registered since 2008.

Aside from the escalating production costs, base oil market participants were dealing with ongoing additive shortages, supply chain disruptions and transportation issues. This has led to several blenders and manufacturers having to trim operating rates or implement allocations on finished product offers, partly dampening base oil demand.

To add fuel to the fire, railway transportation was experiencing obstructions and delays as railcars remained stuck in certain locations, causing a shortage at the other end of the routes, while suppliers also complained about the lack of a suitable alternative given a shortage of truck drivers and high diesel and gasoline prices.

On the naphthenic base oils front, operations were impacted by similar factors as those present on the paraffinic side, with steep transportation, labor and raw material costs applying pressure on values. Pale oil supply and demand was described as snug, given that requirements were steady, and availability was still recovering after turnarounds and reduced output at naphthenic base oil plants earlier this year.

In view of the upward movement of base oil prices and other factors impacting production, several independent lubricant manufacturers, as well as a number of majors, announced price increases on finished products of up to 15% to 25%, scheduled to go into effect between April 1 and May 2. These adjustments come on the back of markups of up to 18% implemented by a large number of finished products manufacturers between March 1 and March 28. Historically, it has been unusual to see so many price adjustments taking place within a matter of months.

Additive producers have also lifted additive prices due to the increase in base oil pricing and other factors. Two major additive producers raised prices by up to 15% on March 31 and April 15, respectively. A third additive supplier lifted 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.

Upstream, crude oil futures remained volatile, extending a four-day rally early on Tuesday on expectations of a possible EU ban on Russian oil imports, but plummeting later in the day as the International Monetary Fund cut its economic growth forecasts and warned of higher inflation, fanning concerns about oil demand destruction. The IMF now expects the world economy to expand by 3.6% in both 2022 and 2023, reflecting a marked deceleration from a 6.1% growth rate in 2021.

On April 19, West Texas Intermediate (WTI) May futures settled at $102.56/barrel, compared to $100.60/barrel on April 12.

Brent futures for June delivery settled at $107.25/barrel on the CME on April 19, from $104.64/bbl on April 12. Louisiana Light Sweet crude wholesale spot prices were hovering at $110.04/barrel on April 18 and had settled at $95.32/bbl on April 11, according

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.