U.S. Base Oil Price Report


A seasonal slowdown in demand coupled with steady production rates at most facilities have resulted in oversupply conditions in the United States, but recent efforts by suppliers to reduce the product overhang seemed to be paying off. A number of producers have started to trim production rates, while others have exported a few cargoes or lowered their spot price expectations to encourage additional purchases within the domestic sector.

While paraffinic base oil prices remained exposed to downward pressure due to the supply and demand imbalance, there have not been any posted price adjustments as crude oil and feedstock prices offered support to the current price structure. Furthermore, with the rise in values of competing refined products and an expected diesel supply crunch, base oil managers needed to keep healthy margins to validate base stock output.

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Spot prices have softened given producers’ drive to find homes for their excess barrels, but they appeared to have stabilized week on week, although the lighter grades continued to experience more pressure than the heavier viscosities. There were discussions to ship product to Mexico and other destinations in Latin America, as well as to India, but steep U.S. offers, high freight rates and difficulties finding vessel space were hampering the conclusion of some of the proposed transactions. Even so, suppliers were still finalizing business into Mexico this week. Additionally, a 2,500-metric-ton cargo was expected to be shipped from Houston, Texas, to Rio de Janeiro, Brazil, in late November to early December, and a second cargo was also discussed to cover the same route in the first half of November. A 3,000-4,000-metric ton cargo was mentioned for shipment from Houston to La Plata, Argentina, for November and December dates.

Given ample availability and competitive prices in other regions, a few cargoes were mentioned for shipment from Asia and the Middle East to the Americas. A 4,000-7,000-metric-ton lot was on the table for lifting in Northeast Asia to Brazil in late November to early December. A 3,000-5,000-metric-ton prompt cargo was expected to be shipped from Hamriyah, United Arab Emirates, to Tampa, Florida. Details emerged on about 20,000 metric tons that were shipped from Pyontaek and Yeosu, South Korea, to La Plata and Campana, Argentina, between late August and early September. There was also an inquiry for shipment of 8,000 metric tons from Pyontaek and/or Daesan, South Korea, to the U.S. Gulf in February 2023. 

Paraffinic base oils supply levels have grown, even though a major producer was just wrapping up a turnaround at its API Group II and Group III plant. Motiva shut down the unit that produces Group II 600 neutral in October concurrently with maintenance work on several units at its Port Arthur, Texas, refinery. The producer was expected to restart its base oils plant this week, although no direct confirmation was available. The company had not placed customers on allocation, and participants said that there had not been any shortages of product, although there had been a temporary tightening of the heavy grades as two Group II producers had suffered unexpected production setbacks in the previous months. However, Group II supply appeared to have improved over the last month as production rates have increased and more spot volumes were offered on a spot basis.

Participants said that talk about temporary voluntary allowances had started to surface this week. There were some reports of TVAs being granted on extra barrels purchased beyond those agreed under contract. Most of the price pressure seemed to be centered on spot business, as producers tried to find homes for their excess barrels, and spot prices were expected to be exposed to downward pressure as long as there were no general posted price decreases, sources noted.

Activity in the Group III segment seemed to be proceeding without any hiccups, with available volumes deemed sufficient to cover the current call for product. Demand for the Group III base oils has been steadily increasing – particularly for the 4 centiStoke grade given new automotive lubricant formulations – and prices were stable.

On the naphthenic base oils side, availability has grown tight on the back of a recent plant turnaround and unplanned production issues at another plant earlier in August/September against steady requirements. The producer that had suffered the unexpected outage was rebuilding inventories, according to sources.

The planned turnaround at Calumet’s naphthenic base oils plant in Princeton, Louisiana, was completed last week and the plant was running well. Sources hoped that the restart of the plant would lead to more pale oils coming into the market to meet healthy demand.

There were no definitive discussions about prices in the naphthenic base oil segment, with both buyers and suppliers keeping an eye on supply and demand fundamentals, feedstock prices and inflationary forces.

Lubricant and finished product manufacturers continued to face additive supply issues and these were not expected to be resolved until the first quarter of 2023 at the earliest. Availability has improved, however, and those manufacturers previously affected by additive shortages have been able to increase production rates. However, a cooling of lubricant demand was noted, with some suppliers opting for withdrawing previously announced increases, or lowering lubricant prices to attract business.

Upstream, crude oil futures fell on Monday and Tuesday after moving up the previous week on worries about the outcome of the U.S. midterm elections, together with rising concerns about further lockdowns in China as COVID cases shot up, possibly resulting in reduced crude oil and fuels demand in the world’s largest crude importing country.

On November 8, WTI December futures settled on the CME at $88.91/barrel, compared to $88.37/bbl on Nov. 1.

Brent futures for January 2023 delivery settled on the CME at $95.36/barrel on Nov. 8, from $94.65/bbl on Nov. 1.

Louisiana Light Sweet crude wholesale spot prices were hovering at $95.30/barrel on Nov. 7, from $89.24/bbl on Oct. 31, 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.