On the paraffinic front, a seasonal decline in demand and steady production rates at most refineries have brought about an increase in base oils availability. This condition was exerting pressure on pricing, with some spot indications falling by about 10 to 20 cents per gallon from the previous week as producers were hoping to find a home for their extra barrels within the domestic market. There were also reports of consumers requesting temporary voluntary allowances on contract shipments given the sliding spot prices and ample supply, but it was unclear whether these requests had been granted.

API Group I bright stock seemed to be holding its value better than the other grades because suppliers have trimmed production rates when needed, according to sources. There has been keen buying interest from Brazil and other countries in the Americas, but buying indications have generally been deemed too low, thwarting the conclusion of some of the proposed transactions.

Group III supply and demand seemed more balanced, as the influx of imports has been modulated by turnarounds at Group III facilities in Europe and the Middle East against steady requirements at home. The 4 centiStoke grade was the star of the show as it attracted the most attention and as such its availability remained limited. The 6 cSt and 8 cSt grades were more readily obtainable. However, Group III suppliers were preparing for an uptick in demand for all grades as additive supply was steadily improving and suppliers have begun to ease their allocations.

The impact of a planned turnaround at Motiva’s Group II/III unit in Port Arthur, Texas, this month was more limited than expected given growing supplies at other producer’s sites. Availability of the Group II 600 neutral grades was initially strained, but a second producer – which had suffered some production setbacks earlier – has apparently ramped up rates and was able to offer additional volumes.

Motiva’s base oil plant was expected to restart at the end of the month. The producer had built inventories to cover obligations during the outage. There were indications that the Group II 600N cut might remain on the tight side through 2023 for some producers, with little excess oil expected beyond those volumes needed to cover contractual requirements.

A third U.S. Gulf Group I and II producer has also been able to increase production rates, following an extended turnaround that had started back in June. The producer was heard to have experienced technical issues when it was ready to restart the plant in August and the unit had been running at reduced rates until earlier this month.

Export opportunities have been few and far between given that base oil prices were lower in other regions than in the U.S., supply there has also been abundant and freight rates remained steep. However, there were still reports of suppliers discussing potential shipments to Latin America, India and Africa. Transactions to Mexico have been scarce due to lackluster demand amid economic uncertainties and reduced demand for lubricants, although U.S. suppliers continued to offer cargoes at discounted levels compared to those seen in the domestic market in order to entice buyers.

Rising fuel prices were encouraging refiners to stream more feedstocks or light base oils into distillates output in detriment to base oil production.

As mentioned above, one factor that has been beyond base oil suppliers’ control was the lingering shortage of additives, which affected demand of several base oil grades as blenders had been forced to run manufacturing plants at reduced rates. A major additive supplier that had recently placed customers on sales control due to a strike and ensuing supply chain disruptions in Europe has reportedly lifted its allocation program. Two other additive suppliers have maintained their allocations despite having lifted their force majeures about a month ago, but they were expected to offer more supplies in the next few weeks. Blenders who had kept base oil inventories low because of the additive shortages were anticipated to return to the market to replenish stocks.

Finished products manufacturers have been affected by additive shortages to various degrees, with some seeing little impact and others having had to adjust manufacturing rates as their production was heavily dependent on specific additives. However, blenders were also facing uncertainties in terms of demand for finished products, as some segments cooled down at the start of the fourth quarter.

Upstream, crude oil futures slumped in early trading on Tuesday on economic data pointing to the possibility of a global recession, which fed fears about a potential drop in crude demand. However, futures rebounded later in the day, lifted by a weaker dollar and remarks by Saudi Arabia’s energy minister, who noted that energy stockpiles were being used to manipulate markets. Additionally, the head of the International Energy Agency said that world was in the middle of “the first truly global energy crisis,” highlighting concerns about insufficient oil and gas production.

On Oct. 25, West Texas Intermediate (WTI) December futures settled at $85.32/barrel, compared to $82.82/bbl for November futures on Oct. 18.

Brent futures for December delivery settled on the CME at $93.52/barrel on Oct. 25, from $90.03/bbl on Oct. 18.

Louisiana Light Sweet crude wholesale spot prices were hovering at $88.27/barrel on Oct. 24, from $89/bbl on Oct. 17, 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.

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