U.S. Base Oil Price Report

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Motiva informed its customers that the company would be decreasing posted prices, with the adjustment becoming effective retroactively on Sept. 1. Other producers were evaluating market conditions, but no further announcements surfaced by close of business on Tuesday. Not only were market participants concerned about price fluctuations and lengthening supply, but they were also keeping an eye on a potential rail strike that could bring the U.S. freight system to a grinding halt and impact industrial operations.

According to reports, Motiva lowered the price of its API Group II 100N cut and 220N cut by 50 cents per gallon, and its 600N grade by 20 cents/gal. Within the Group II+/III segment, Motiva’s prices for the 2 centiStoke and 3 cSt grades were reduced by 50 cents per gallon, while prices for its 4 cst, 6 cst and 8 cst grades remained unchanged. The producer was also preparing for a turnaround at its base oils plant, starting in October.

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The decreases were likely driven by softer crude oil and feedstock prices over the last several weeks, slowing base oil demand and a lengthening of supplies, although participants noted that availability of the Group II 600N grade was snug.

An extended turnaround at another U.S. Gulf producer’s Group I and Group II facility had resulted in heightened interest for Group I and Group II base oils from other suppliers. However, demand has started to slow down with the approach of the last quarter of the year, which is when requirements tend to be lower and inventories grow. Suppliers also start to release some of the extra stocks they had held during hurricane season.

Consequently, Group I and Group II supplies have lengthened, exerting downward pressure on spot indications, with price ideas slipping anywhere from a couple of pennies to 10 cents, depending on the product.

Activity in the Group III segment was described as steady, particularly as demand for the 4 cSt grade remained brisk. By comparison, the 6 cSt and 8 cSt commanded less buyer attention and were often sold in combination with the 4 cSt so suppliers would not be left with a product overhang of these grades. A supplier of Middle East material was heard to have increased the volumes it is moving to the U.S. market and was the second largest importer in July, according to sources.

At the same time, there have been movements of Asian product to Latin America, as prices in that region were considered competitive, although high freight rates hampered some of the proposed transactions. A 2,600-metric ton cargo was discussed for prompt shipment from Ulsan, South Korea, to Guayaquil, Ecuador. Buying interest from Mexico remained lackluster as several Asian and European parcels have arrived in recent weeks or are due to arrive, and there were many uncertainties in terms of demand from downstream applications.

On the naphthenic base oils front, there were no price adjustments reported. Producers had introduced a 30 cent-per-gallon decrease in early August due to the fall in crude oil and feedstock prices. Market players described the supply and demand situation as largely balanced. Steady demand from certain segments like the transformer oil sector, together with an unexpected plant shutdown, an upcoming turnaround and steady demand from Latin America have tightened availability.

A producer’s paraffinic base oils unit suffered an unexpected production issue in mid-August and the plant remained off-line until last week, leading to low inventories at the producer’s facilities. A second producer has scheduled a maintenance program starting the second week of October and has been building stocks to cover demand during the turnaround.

Meanwhile, participants have been closely monitoring freight rail labor negotiations as the first national railroad strike in 30 years could begin this Friday, CNN.com reported. About 60,000 union members who work for the railroad would be going on strike and this would significantly disrupt freight transportation, given that the rail system carries nearly 30% of the nation’s freight.

Downstream, an additive supplier implemented a price increase of up to 15 percent in August, while a second additive supplier increased prices on Sept. 1. A third additive manufacturer has communicated price markups of up to 10%, effective Sep. 23. The increases come on the back of inflationary pressure, steep feedstock costs and tight supply of most additives. An additive manufacturer is keeping customers on 50% allocation due to recent production issues and an accompanying force majeure declaration, and the situation was not expected to improve significantly for a couple of months.

Lubricant manufacturers, on their part, were also trying to push through increases, although some of them have either been revised or delayed. Following increase announcements for implementation in June, July and early August, and a number of suppliers intended to adjust values in September or October. This month, one supplier was expected to increase prices by up to 15% on Sep. 1, a second manufacturer plans to raise prices on Sep. 14, while a third manufacturer has slated an increase with an effective date of Sep. 19, but the amount will vary depending on the product. There was also a communication from a supplier calling for an increase that will go into effect on Oct. 1. Several independent blenders were still evaluating the market situation and mulling price revisions due to the upward price pressure.

Upstream, crude oil futures fell in early trading on Tuesday, reversing earlier gains, as analysts predicted the U.S. Federal Reserve would announce another significant interest rate increase next week as inflation inched up, dampening consumer demand. Extended COVID-related lockdowns in China also had a bearish effect as demand from the second largest oil consumer was expected to decline.

On Sept. 13, West Texas Intermediate (WTI) October futures settled at $87.31/barrel, compared to $86.88/bbl on Sept. 6.

Brent futures for November delivery settled on the CME at $93.17/barrel on Sept. 13, from $92.83/bbl on Sept. 6.

Louisiana Light Sweet crude wholesale spot prices were hovering at $90.48/barrel on Sept. 12, compared to $89.59/barrel on Sept. 2, according to the Energy Information Administration. (There was no trading on Sept. 5 due to the Labor 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.