U.S. Base Oil Price Report


Two increase initiatives emerged this week: One on the paraffinic side of the base oils market, and the other on the naphthenic side. Rerefiner Avista Oil communicated a posted price markup, following a round of increases that started on May 20, while Cross Oil informed its customers of an increase on pale oils, the second adjustment in about a month. The increases were driven by sky-high crude oil and feedstock prices, together with rising energy, transportation and labor costs.

Avista Oil announced an increase of 35 cents per gallon on its API Group II+ base oil late last week. The increase went into effect on June 6. The company explained that the adjustment was due to changing fundamentals including unprecedented cost inflation to source feedstock and produce base oils, coupled with very firm demand and tight inventories.

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This price revision follows a string of paraffinic base oil increases which lifted Group I, Group II and Group II+ postings by 20, 25, 30, 35 and 45 cents per gallon, depending on the supplier and the product, between May 20 and May 27. The initiatives were mostly fueled by tight supply, mounting feedstock values, and healthy demand, suppliers reiterated. “Demand has been overall solid,” a source noted, while another mentioned not being able to build inventories as buyers were taking most of their contractual volumes, leaving little extra availability.

There had also been an earlier round of paraffinic price increases, which had lifted postings between 20 cents/gal and 70 cents/gal between May 4 and May 23, as fundamentals have been extremely volatile since the start of the Russian war on Ukraine in late February amid ongoing COVID-19 pandemic-related concerns.

Another factor that was affecting base oil availability was an upcoming turnaround at a Group II unit in August. The producer was heard to have started building inventories and limiting the volumes offered for spot business. 

There was a dearth of spot parcels for export, particularly after several lots were concluded for shipment to Europe and South America. A majority of producers were focusing on meeting domestic demand, which was heard to be healthy as consumers were drawing most of their volumes agreed under contract, particularly as many were padding inventories on account of the start of the hurricane season.

Suppliers mentioned having concluded business into Mexico, but Group I availability has been curtailed as a United States producer has very little extra product to offer. The supplier has suffered some production setbacks in recent weeks and has been unable to entertain sizeable Group I spot business, according to sources.

Demand for Group II and Group III base oils was healthy, partly due to the fact that additive supply improved and lubricant producers were placing more base stock orders to increase production rates. Group III supplies were deemed adequate to cover requirements as Middle Eastern and South Korean products continued to flow steadily into the U.S.

On the naphthenic base oil front, Cross Oil communicated a 30 cents/gal increase on its pale oils, effective June 15. The company explained that the increase was being driven by market factors including the recent unprecedented and continued price increases in crude oil and natural gas, inflation and other climbing costs.

This initiative comes on the back of a preceding upward adjustment of 25 cents/gal and 30 cents/gal by a majority of naphthenic producers, implemented between May 16 and May 31.

Aside from high crude oil and feedstock costs, snug supplies against steady demand offered support to the fresh initiative. Other suppliers continued to monitor the market as underlying conditions remained volatile and increases were implemented as recently as the end of May. Producers were also evaluating refinery economics in light of very high diesel prices and the need to improve base oil premiums over fuel values, so that production could be sustained.

The ongoing Russian war on Ukraine continued to impact crude oil, natural gas and refined product prices as bans on Russian imports were implemented by the U.S. and the European Union. Gasoline has jumped to all-time highs in many parts of the country, and fuel production was being favored at some refineries to the detriment of base oil output. Experts commented that gas prices ran the risk of climbing even more as a busy hurricane season could potentially result in refinery shutdowns.

Buying interest for naphthenic base oils remained strong in the domestic market, and there has been increased appetite for U.S. product from Latin America as buyers hoped to fill the gap left when a European supplier withdrew from marketing its products in the Americas. U.S. prices have moved up, but consumers appeared willing to accept higher offers if this meant securing enough material to keep lubricant production running at optimum levels.

The additive segment has been plagued by production issues and other conditions leading to supply shortages. While lubricant manufacturers continued to deal with tight raw material supplies, the situation was much improved compared to earlier in the year, with some blenders able to source most of the additives they needed without difficulties because additive plants have ramped up rates. However, price pressure seemed to be a factor affecting everyone equally.

Sources reported that a major additive producer has communicated a price increase on its automotive additives, plus its liquid viscosity improvers, of up to 15%, with other products from the same supplier increasing by up to 10%. These increases were expected to go into effect on July 1. This was the third round of additive increases since the beginning of the year. So many additive increases in a relatively short time span were rare, sources noted.

Additive producers had previously raised additive prices in March and April, driven by the climbing cost of base oils and other raw materials. Two major additive producers lifted prices by up to 15% on March 31 and April 15, respectively. A third additive supplier lifted prices by 12% on April 18. Additive producers had also introduced price increases of up to 15% between Jan. 31 and Feb. 21.

As a result of base oil and additive price increases, along with higher transportation, logistics and packaging values, lubricant and finished products manufacturers were also in the process of implementing markups. A number of lubricant producers have now joined the bandwagon of those blenders who already had announced increases in recent weeks, including several majors. Increases of up to 8%-20% have been communicated, with implementation dates scheduled between May 27 and July 5.

Upstream, crude oil futures were largely stable on Tuesday as investors evaluated the risks of tightening supply and the prospect of higher demand as China eased its COVID restrictions.

Analysts warned that sustained high oil prices could tip the economy towards a recession, especially given that retailers such as Target warned about cautious consumer spending amid inflation and sky-high gas prices, Yahoo Finance.com reported.

On June 7, West Texas Intermediate (WTI) July futures settled at $119.41/barrel, compared to $114.67/barrel on May 31. In comparison, on June 8 last year, WTI futures were hovering at $70.05/barrel.

Brent futures for August delivery settled at $120.57/barrel on the CME on June 7, from $122.84/bbl on May 24.

Louisiana Light Sweet crude wholesale spot prices were hovering at $119.86/barrel on June 6 and had settled at $116.51/bbl on May 27, according to the Energy Information Administration (There was no trading on May 30 due to the Memorial Day holiday).

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.