U.S. Base Oil Price Report


Cross Oil joined those naphthenic producers who had communicated price decreases last week. The adjustments were prompted by lower crude oil and feedstock prices, along with an expected seasonal slowdown in base oil demand.

Cross Oil announced a price decrease on all grades of packaged naphthenic base oils of 30 cents per gallon, effective Aug. 8. In addition, the company explained that it would discount bulk base oils to reflect the new market prices on a customer-by-customer basis. It added that the adjustment was “being driven by recent weakness in crude markets and relief on pricing is reflective of the new market conditions.”

Last week, Ergon and Calumet had announced a 30-cent per gallon decrease, with effective dates of Aug. 5 and Aug. 8, respectively. Other suppliers were still evaluating market conditions.

Naphthenic base oil supply and demand were fairly balanced, although availability of some grades has started to lengthen on more subdued industrial activity in the United States, likely due to inflation and economic uncertainties.

On the paraffinic side of the market, posted prices remained stable, but spot prices have slipped as base oil availability has risen in most regions and competition to seize export opportunities has intensified. However, steep freight rates and a lack of vessel space on certain routes was dampening the conclusion of business. Low buying price ideas in Mexico have also been delaying export deals involving U.S. products.

Northeast Asian and European suppliers also attempted transactions to different destinations in the Americas. This week, it was heard that a 3,000 metric ton shipment was being discussed for shipment from Mailiao, Taiwan, to Rio de Janeiro, Brazil, at the end of August. Another 3,000 metric tons were quoted to be lifted in India to Rio de Janeiro for August and September dates. About 10,000 metric tons were expected to be shipped from Rotterdam, Netherlands, to the Caribbean or the U.S. Gulf at the end of August as well.

In terms of domestic business, reports circulated of a number of suppliers granting temporary voluntary or value allowances between $10-30 cents/gal to some customers, but this situation did not seem widespread. It appeared that suppliers were waiting to assess the market before making any revisions, especially given that the hurricane season was anticipated to be a very active one after a “slow start,” with several major storms expected in the next couple of months, according to sources. Any supply disruptions brought about by severe weather could impact pricing moving forward. Once the hurricane season is over and if no major storms disrupt production, more base stock barrels were expected to come into the market, possibly at the end of September.

At least a couple of producers did not have extra availability as their plants were either undergoing a turnaround or were getting ready to be taken off-line for maintenance. An API Group II producer was heard to be completing a turnaround and was expected to restart the unit by the end of the month. A second key Group II/III producer will be starting a month-long turnaround in October and was building inventories ahead of the shutdown. The turnaround schedule was not confirmed by the producers directly.

As a result of these production outages and of refineries favoring distillates output, availability of some heavy base oil grades remained limited, with the Group II 600 neutral said to be particularly tight, supporting current pricing. This prompted some buyers to secure Group I heavy grades as a replacement.

Participants were also keeping a close eye on the current additive supply situation, following the force majeure declaration by Afton Chemical as its additives plant in Sauget, Illinois, was forced to shut down due to flooding on July 26.

Production outages and supply chain disruptions have resulted in strained supplies and shortages since late 2019, sometimes forcing lubricant blenders and finished product manufacturers to reduce operating rates or place customers on allocation. Although Afton’s production outage was expected to impact lubricant production rates at customers’ blending plants and possibly result in reduced base oil demand–particularly for those grades used in automotive applications–it was still unclear how much the company’s supply would be affected, with many waiting to receive further directives and some blenders already adjusting production rates.

A second additive supplier has communicated a price increase, which will go into effect on Sept. 1, given the tight market conditions and high production costs.

Lubricant manufacturers also implemented price increases in June, July and early August, and at least one supplier intended to adjust prices by up to 15% on Sept. 1 as well.

Upstream, crude oil futures fell by over $1 per barrel early on Tuesday, as prospects of a renewed 2015 Iran nuclear accord appeared more realistic, with the European Union proposing a “final” text to revive the deal, eventually allowing Iran to boost crude exports in a tight market, according to Reuters. Ongoing fears of a recession also dampened prices.

On Aug. 9, West Texas Intermediate September futures settled at $90.50/barrel, compared to $94.42/bbl on Aug. 2.

Brent futures for October delivery settled on the CME at $96.31/barrel on Aug. 9, from $100.54/bbl on Aug. 2.

Louisiana Light Sweet crude wholesale spot prices were hovering at $96.17/barrel on Aug. 8, compared to $99.59/barrel on Aug. 1, 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.