The speed of price increase announcements seemed to accelerate this week. While Safety-Kleen communicated a posted price increase, rounding out a string of base oil price adjustments that started in early May, several producers stepped out with a second increase initiative in the span of about three weeks. ExxonMobil, Chevron, Excel Paralubes, HollyFrontier, Petro-Canada, Paulsboro and Calumet all announced fresh paraffinic base oil increases, with effective dates between May 20 and May 27. On the naphthenics front, Ergon and San Joaquin Refining also announced price markups.
Safety-Kleen lifted the posted price of its API Group II+ RHT 120 and RHT 240 base oils by 70 cents per gallon, effective May 18.
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The rerefiner’s price revision comes on the back of a series of increases implemented by a vast majority of paraffinic producers and rerefiners, who raised postings between 20 cents/gal and 70 cents/gal, depending on the amount and the timing of previous adjustments. These price markups went into effect between May 4 and May 23.
No sooner had these increases been announced, than ExxonMobil was heard to have lifted posted prices again last Friday, on the heels of its previous initiative, which had gone into effect on May 17. This time, the company was reported to have increased its Group I grades by 25 cents/gal and its Group II and Group II+ prices by 45 cents/gal, effective May 20. The preceding adjustment had lifted Group I prices by 20 cents/gal and Group II/II+ postings by 30 cents/gal, effective May 17.
Excel Paralubes increased its Group II 70N and 110N cuts by 30 cents/gal, its 225N grade by 35 cents/gal and its 600N base oil by 45 cents/gal, effective May 24. During the recent round of increases, Excel Paralubes had raised its Group II 70N and 110N base oils by 15 cents/gal, its 225N cut by 20 cents/gal and its 600N grade by 25 cents/gal, effective May 4.
Chevron will be increasing its Group II 100 by 20 cents/gal, its 220 by 30 cents/gal and its 600 by 45 cents/gal, with an effective date of May 25, “to reflect current market conditions,” the company explained. Chevron had recently lifted postings of its Group II 100R and 220R grades by 25 cents/gal and its 600R grade by 30 cents/gal on May 10.
HollyFrontier communicated a 25 cents/gal price increase for all viscosities of its Group I base oils, effective May 27. The preceding initiative lifted prices by 20 cents/gal, effective May 18.
Petro-Canada intends to increase its Group II+ 100N grade by 40 cents/gal, effective May 27. Petro-Canada’s Group II+ prices had been raised by 35 cents/gal on May 18.
Paulsboro will be increasing its Group I posted prices by 25 cents/gal on May 25. The preceding initiative called for a Group I price increase of 20 cents/gal as of May 20.
Calumet communicated a posted price increase of 25 cents/gal on all its paraffinic base oils, effective May 27. The previous initiative called for a 20 cents/gal increase, effective May 19.
On the naphthenic side of the market, Ergon communicated an increase in pricing of naphthenic oils in the North American market of 30 cents/gal, with an effective date of May 27. “The increase will apply to all viscosities,” the company noted.
San Joaquin also announced that the company would be increasing prices on all naphthenic oils by 30 cents/gal, effective May 31, “due to increased costs and changing market conditions.”
Naphthenic base oils producer Cross Oil had recently stepped out with a 25 cents/gal increase initiative that went into effect on May 16, while Calumet informed its customers that the company would be increasing naphthenic base oils by 30 cents/gal across the board, effective May 24.
The base oil initiatives were prompted by high crude oil and feedstock values, climbing production costs due to inflation, reduced vacuum gas oil availability and a tight base oil supply/demand ratio.
Base oil market participants were still facing a number of market uncertainties, including a potential shortage of feedstocks due to the ongoing conflict in Ukraine and the bans imposed on Russian exports of crude oil and other refined products.
Additionally, refiners were assigning priority to fuel production given the steep prices and tightening of diesel supplies, which meant base oil output was sometimes affected by reduced feedstock availability. The approach of the summer driving season would likely lead to an increase in fuels demand as well, placing even more pressure on refiners to focus on competing fuel production. Base oil managers were partly forced to increase prices to warrant sufficient base oil output to cover flourishing demand.
These conditions led to a snug supply scenario for all base oil grades, but the light-viscosity cuts were particularly strained, supporting the recent price initiatives. A Group I producer was heard to be in possession of limited inventory of the light grades at present due to recent refinery issues, but was expected to be able to offer more products in the coming weeks.
Group II base oils were also described as constrained, as demand has been healthy both on the domestic, as well as the exports side, but Group III availability appeared to be more plentiful than a month ago. “Group III might be loosening a bit, but it’s not long,” a source explained, citing the higher prices in the United States compared to other regions as a reason that more shipments might be attracted.
The snug conditions in the Group I and Group II segments were exacerbated by participants’ drive to pad inventories ahead of the hurricane season–which runs from June 1 until November 30 on the Atlantic Basin–to cover possible production outages caused by a severe storm that might impact domestic base oil plants.
A gradual recovery in additive supply levels was also encouraging more base oil purchases as blenders were able to increase manufacturing rates, sources noted.
Given the healthy demand in the domestic market, U.S. producers were not able to offer large quantities of base oils for spot business, but a few cargoes were earmarked to move to Mexico and Latin America. A small parcel was being discussed for shipment from Houston, Texas, to Rio Haina, Dominican Republic. Additionally, it was heard that Northeast Asian producers had also considered transactions involving base oils moving to Mexico, South America and the Caribbean, but they had encountered difficulties with logistics and vessel space.
Downstream, there were reports that some blenders had been able to ramp up manufacturing rates given an increase in additive supplies, just in time for the summer driving season in the U.S. While the situation was not optimal, it was a marked improvement over previous months, sources said. Others were still careful about production rates due to uncertainties in terms of additive supplies. Meanwhile, additive suppliers were heard to be maintaining their allocation programs for the time being.
Lubricant and finished products manufacturers were on the brink of implementing price increases of up to 8%-15%, with implementation dates dotted between May 27 and July 1. Some of the increases of a previous round intended for April became effective in May due to lubricant delivery delays. The price adjustments have been triggered by mounting base oil and other raw material costs, along with steeper transportation, logistics and packaging prices.
Upstream, crude oil futures did not show much fluctuation early in the week, settling just slightly higher on Tuesday as lingering concerns about a possible global recession were overshadowed by an optimistic outlook on fuel demand with the approaching summer driving season in the U.S., and a relaxation of coronavirus lockdowns in China –the world’s second largest oil consumer. However, China’s intention of continuing to buy Russian oil placed some downward pressure on values.
On May 24, West Texas Intermediate (WTI) July futures settled at $109.77/barrel, compared to $112.40/barrel for June futures on May 17.
Brent futures for July delivery settled at $113.56/barrel on the CME on May 24, from $111.93/bbl on May 17.
Louisiana Light Sweet crude wholesale spot prices were hovering at $110.62/barrel on May 23 and had settled at $116.27/bbl on May 16, 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.
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