Several fresh price initiatives were reported this week on both the paraffinic and naphthenic sides of the base oils market. The price movements were prompted by soaring crude oil and feedstock values, rising production and transportation costs, and a balanced-to-tight supply and demand ratio.
On the paraffinic front, Chevron stepped out with a posted price increase of 40 cents per gallon on all of its API Group II base oils, effective June 14. The company explained that the increase reflected current market conditions.
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Motiva communicated an increase of 30 cents/gal on all Group II and Group III grades, effective June 15, with the exception of the Group II 600 vis, which will move up by 40 cents/gal.
According to reports, ExxonMobil also communicated a posted price increase on all of its base oils. The producer’s Group I 100 and 150 vis cuts will be raised by 35 cents/gal; its Group I 330 and 600 will be increased by 40 cents/gal and its Group I bright stock by 20 cents/gal. ExxonMobil’s Group II and Group II+ grades will be lifted by 35 cents/gal, all with an effective date of June 20.
Calumet announced a posted price increase of 40 cents/gal on all of its Group I and Group II base oils, with the exception of Group I bright stock, which will be lifted 20 cents/gal. The adjustments go into effect on June 20.
Paulsboro intends to increase its prices as well, with its Group I light grades moving up by 35 cents/gal, its mid and heavy grades by 40 cents/gal and its bright stock by 20 cents/gal as of June 22. The posted prices portrayed in the price table below will be adjusted next week, which is when Paulsboro’s increases go into effect.
Last week, on June 8, rerefiner Safety-Kleen also implemented a price increase of 31 cents/gal on its Group II+ RHT120 and RHT240 grades, in association with the launch of its Kleen+ brand of base oils. “We believe this new price point more accurately reflects the value of Kleen+ as it relates to quality, sustainability, reliability and the supply/demand dynamics for re-refined base oil,” a company source noted. Safety-Kleen’s prices will be marked with a double asterisk in the price table below to highlight the company’s sustainability goals as its base oils are rerefined from used motor oil. (For more information on Kleen+ base oils, please see “Safety-Kleen Rebrands Base Oils” in the June 8 issue of Lube Report).
On the naphthenic front, Calumet announced a price increase, which will become effective on June 20. All of Calumet’s naphthenic products will increase by 30 cents/gal.
Last week, Cross Oil had also communicated a 30 cents/gal increase on its pale oils, effective June 15. According to the company, the increase was being driven by market factors such as the unprecedented and continued price increases in crude oil and natural gas, inflation and other climbing costs.
Previously, naphthenic producers had implemented increases of 25 cents/gal and 30 cents/gal between May 16 and May 31. Other suppliers continued to monitor the market as underlying conditions remained volatile.
The price increase initiatives on both fronts were receiving support from high crude oil and feedstock values, snug supplies against healthy demand, and other mounting costs such as logistics and transportation.
Sources said that demand has been healthy due to the driving season but may start to slow down as blenders have probably built enough inventories to cover spring production needs and a “summer swoon” might set in, exacerbated by high prices which placed a bit of a damper on orders.
Aside from the current demand levels, producers mentioned that refiners were basing decisions on what products were offering the best margins in light of strained and high-priced vacuum gas oil supplies. Some refiners continued to favor the production of fuels, leading to a decrease in base oil output. “This increase is because diesel export demand is insatiable and profits for diesel are higher than base oil,” a source commented, adding that without price adjustments, base oil production would be affected. This was particularly impacting naphthenic and Group I availability. A Group I producer was heard to be building inventories following some supply disruptions last month.
A Group II base oil producer plans to shut down its unit in the second half of the year for maintenance – having delayed the shutdown from an earlier date – and has started to build inventories, while a second producer will be embarking on a turnaround in early 2023. Group II supply was expected to tighten further. Availability was already described as strained in the United States as suppliers focused on meeting strong domestic demand.
Firm spot prices in the U.S. have attracted imports from Asia, with a 17,000-metric ton cargo heard discussed for shipment from Ulsan, South Korea, to Houston, Texas, in the first half of July. Other parcels originating in Asia were finalized recently to the U.S. and Latin America, but high freight rates were making some transactions difficult to conclude. Prices for U.S. product were not deemed as competitive as Asian material, however, and fewer U.S. spot volumes were moving to South America as a result. Regular U.S. shipments to Mexico continued to be noted, but volumes appeared to have declined compared to earlier in the year due to softer demand from the lubricant segment.
Demand for Group III remains steady in the U.S., with the inflow of cargoes from the Middle East and Asia, together with domestic output, meeting most requirements. Orders have improved on the back of increased availability of additives and the ensuing higher operating rates at blending facilities.
Recent base oil price increases and the fresh initiatives have led downstream manufacturers to adjust prices as well.
Sources reported that two major additive producers have communicated price increases of up to 10, 12 and 15%, depending on the product, expected to go into effect on June 27 and July 1, respectively. This was the third round of additive increases since the beginning of the year, with previous movements implemented in March/April and January/February.
A number of lubricant, grease and other finished product manufacturers have announced increases in recent weeks as well, 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 edged up on Tuesday, but reversed course later in the day to settle at the lowest levels in a week. Prices had reacted to bans on Russian imports in several countries amid tight global supply, which outweighed concerns that a possible recession and fresh COVID-19 restrictions in China would dampen demand in coming days. However, developments linked to the Iran nuclear deal, contract awards related to the Strategic Oil Reserves, a waiver extension allowing U.S. banks to process Russian energy transactions, and a report that a U.S. senator intends to propose a federal tax on certain oil companies to curb inflation drove crude prices down, according to MarketWatch.com.
On June 14, West Texas Intermediate (WTI) July futures settled at $118.93/barrel, compared to $119.41/barrel on June 7. In comparison, in June last year, WTI futures were hovering at $70/barrel.
Brent futures for August delivery settled at $121.17/barrel on the CME on June 14, from $120.57/bbl on June 7.
Louisiana Light Sweet crude wholesale spot prices were hovering at $122.22/barrel on June 13 and had settled at $119.86/bbl on June 6, 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.