U.S. Base Oil Price Report

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Avista Oil and Paulsboro joined other producers in decreasing posted prices this week on the back of lower crude oil and feedstock prices and seasonally weaker demand. Safety-Kleen’s adjustments take effect this week. Participants were also keeping an eye on Hurricane Ian, as it hit Cuba early this week and was heading towards Florida on Tuesday, forcing several offshore oil rigs to shut down ahead of the storm.

Avista Oil lowered postings of its API Group II+ and Group III base oils by 50 cents per gallon on Sept. 26.

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Paulsboro decreased prices of its Group I base stocks by 35 cents per gallon on Sept. 27.

Safety-Kleen will be reducing the posted price on its Group II+ 120 and 240 cuts by 50 cents/gal, effective Oct. 1, although the company had communicated the price change last week.

These adjustments follow similar decreases by a majority of paraffinic producers, with Motiva having been the first one to communicate 20 cents/gal and 50 cents/gal downward revisions, depending on the grade, that went into effect on Sept. 1.

Other producers lowered prices by 20, 30, 35, 40 and 45 cents/gal, depending on the grade, between Sept. 20 and Sept. 26, with the light viscosities generally edging down by the larger amounts as supply of these grades appeared more abundant. Most of the heavy-vis grades were heard to be on the snug side, particularly those in the Group II category.

Base oil demand typically starts to weaken after the end of the summer driving season in early September, and supplies start to lengthen. This year, the effect was slightly less evident as a large supplier Group I/Group II supplier unexpectedly was forced to extend a turnaround, a second Group II producer was experiencing production issues, and a third major producer was preparing for a maintenance program starting in October. The supplier has built inventories to continue covering requirements during the turnaround, but fewer spot volumes were expected to be available.

On the naphthenic base oils front, prices were described as steady, while supply was considered fairly tight as demand has generally not let up. This segment of the base oils market was not as affected by the scarcity of additives as the paraffinic sector. The current tightness was partly the result of an unexpected production outage at a naphthenic base oils plant which lasted about a month. The producer was expected to have restarted operations last week but was reported to have little extra availability.

Another naphthenic base oils producer was preparing for an upcoming turnaround in October and was also limiting the amount of product that it was making available beyond those volumes sold under contract. Given the current supply tightness, export volumes were limited, but attracted quite a lot of interest from South American buyers.

The prevailing supply and demand conditions supported naphthenic base oil prices, despite pressure from the feedstocks side. Naphthenic producers had already lowered prices in early August and were monitoring market developments closely.

Paraffinic suppliers have sought opportunities to export some of the surplus barrels, but supply in other regions seemed ample as well, prices were lower and freight rates continued to hover at steep levels, making it more difficult for numbers to work – except perhaps for flexibags business. Mexican demand has weakened and there were several cargoes that have arrived from Asia that were in storage waiting to be distributed or sold.

Nevertheless, export discussions were ongoing, and it was heard that a 2,500-metric-ton base oils parcel was being considered for shipment from the U.S. Gulf to Gebze, Turkey, in early October. There was also talk about some U.S. Group I barrels moving to Europe.

A 10,000 to 15,000-metric-ton lot of three to four grades was also mentioned in shipping circles for shipment from Ulsan, South Korea, to Houston, Texas, the first week of October.

In downstream markets, last week, Afton Chemical lifted the force majeure it had declared on additive production back on July 26, when its plant in Sauget, Illinois had been flooded. A second major additive manufacturer has also lifted its force majeure, which had been in place for several months.

Afton customers had been placed on 50% allocation, particularly those who purchase engine oil additive packages and some off-road products from the company.

Some of the sales controls were expected to remain in place through the end of the month, but the lifting of the two force majeures heralded the introduction of more additives into the supply system, which has been plagued by shortages for about two years. This had also led to declining demand for certain base oils, as lubricant plants had dialed down operating rates on a lack of additives.

Strained supplies and climbing costs prompted additive suppliers to lift prices by 10% to 15% in August and September.

Lubricant and finished products manufacturers have also implemented increases in recent months because blenders have been carrying higher production costs since the beginning of the year, when base oil prices saw almost monthly markups, and they were still trying to catch up. The last round of posted base oil price increases went into effect in June.

Lubricant manufacturers had therefore called for price increases in June, July and early August, and a number of suppliers intended to raise values by up to 15% in September and/or October as well. However, several independent blenders were still evaluating the market situation carefully as they did not want to hurt demand by marking up prices, and some suppliers have even started to allow for discounts into select accounts to alleviate the cost pressure on finished products buyers.

Upstream, crude oil futures jumped by almost 2% on Tuesday from a nine-month low the previous day as several U.S. producers shut offshore oil production in the Gulf of Mexico ahead of Hurricane Ian. Expectations that the OPEC+ would decide to curb crude output during their next meeting on Oct. 5 also placed pressure on prices.

On Sep. 27, West Texas Intermediate November futures settled at $78.50/barrel, compared to $84.45/bbl for October futures on Sept. 20.

Brent futures for November delivery settled on the CME at $87.27/barrel on Sept. 27, from $90.62/bbl on Sept. 20.

Louisiana Light Sweet crude wholesale spot prices were hovering at $79.87/barrel on Sept. 26, compared to $88.15/barrel on Sept. 19, 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.