U.S. Base Oil Price Report


Naphthenic base oil price increases will be going into effect this week, after several producers nominated 25 cents-per-gallon hikes on the back of steep crude oil and feedstock values, while on the paraffinic side, posted prices remained stable.  

Ergon, Cross Oil, Calumet and San Joaquin Refining have all communicated a 25 cents/gal price increase for naphthenic oils across the board, with the first three producers indicating an effective date of Feb. 11 and San Joaquin rolling out its increase on Feb. 8.

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The increases were prompted by the relentless climb in crude oil and feedstock prices over the last seven weeks, coupled with a fairly tight supply and demand scenario due to plant turnarounds. Producers started to build inventories to cover requirements during the outages a few weeks back, leading to reduced spot availability. The increase announcements were expected to trigger last-minute purchases as buyers tried to secure orders before the markups went into effect, exacerbating the tightness.

Valero’s naphthenic base oils plant in Three Rivers, Texas, was reported to have shut down on Jan. 30 for a turnaround which will last two to three weeks. The plant can produce 2,400 b/d of naphthenic base oils, according to Lubes’n’Greases’ Base Oils Plant Data.

San Joaquin was scheduled to start a turnaround at its Bakersfield, California, refinery on Feb. 12, slightly delayed from an original date of Feb. 1, due to logistical issues. The unit, which has a nameplate capacity to produce 8,100 barrels per day of naphthenic base oils, was expected to be restarted around March 5.

Cross Oil was anticipated to complete a short turnaround at its Smackover, Arkansas, plant in March. The unit has a capacity of 5,000 b/d of naphthenic base oils.

On the paraffinic front, the first couple of weeks of February were considered a transitional period as consumers were assessing product needs for the next few months and would be starting to pad inventories for the spring production cycle.

“U.S. base oil is still fairly slow – we’ll see if it picks up by March 1,” a source noted.

Suppliers were heard to be reviewing future price actions in consideration of rising crude and vacuum gas oil prices. Executives directly involved in everyday sales would probably prefer to wait until March to April for any initiatives as that is when demand returns, a source explained. Several participants concurred that a price adjustment might not be easily implemented at this juncture.

Posted prices in all paraffinic segments were unchanged, but spot pricing has lost some territory over the last several weeks given the plentiful availability of certain grades and lukewarm buying interest. This trend was particularly affecting the mid and heavy-viscosity base oils.

However, rising crude prices were squeezing margins and suppliers appeared more reluctant to make price concessions. Refiners have already trimmed or were considering operating rate adjustments in order to rein in supply, while others favored fuels production over base oil output. These strategies had all resulted in reduced supply of the lighter grades.

Demand in general was described as steady to slightly lackluster, with some pockets of the market seeing more activity than others. The light-viscosity grades were attracting a decent amount of domestic business, but the heavier base stocks were more difficult to move, suppliers conceded.

The export segment has lost some of its vitality too, as fewer transactions were taking place than in December and early January. Sources said that some markets were saturated with product and there were more attractive offers from other regions such as Asia. Asian suppliers were vying with U.S. sellers for business into South America, with a few cargoes being discussed to move to destinations such as Ecuador.

Producers continued to ship cargoes to Mexico, but demand was not as strong as in December and plentiful supplies were available at Brownsville, Texas, for export to the neighboring country. “Mexico seems a little sluggish, but I think it is because of the opposite forces in the market (upward crude costs versus soft supply and demand),” a source commented, adding that buyers were hesitant on concerns that spot prices might drop further and they would have purchased product at higher levels.

U.S. API Group II suppliers have lined up a few cargoes to move to India, but there were reports that consumers in that country were able to obtain not only base oils from local producers, but also from Northeast Asia and the Middle East and some buyers preferred material that did not involve long lead times.

The Group III continued to see steady activity, and some competitive situations have emerged as a new player was trying to establish its presence in the market, sources said. While demand for Group III has been generally strong from the automotive segment, the lack of additives was hampering the smooth operation at a number of lubricant facilities, which in turn had resulted in reduced base oil demand and increased spot availability. Supplies of the 4 centiStoke grade have grown after being snug for a few months, and this was exerting pressure on prices as well.

Nevertheless, a Group III supplier reported a sold-out position, while another said it tried to increase the volumes it was importing into the U.S., but the plant in the Middle East was already running at full rates and no additional product was available.

A lubricant producer has communicated an increase of up to 15% on finished lubricants, effective March 1, on the back of the steeper costs of base oils and additives. Other lubricant and grease producers were also in the process of implementing price increases of up to 16% that were first announced back in November and December. The markups had various effective dates between December 2021 and February 2022 and were fueled by the mounting costs of raw materials, additives, transportation, labor and packaging.

Two major additive producers announced that they would be increasing prices by 15% on Jan. 31 and Feb. 21, respectively. Additive shortages continued to be reported by a number of blenders, resulting in reduced production rates at blending facilities and a lack of certain finished lubricants on the shelves. The situation was expected to persist into the second quarter. “Shortages are particularly evident with 15W-40 and 5W-40 heavy duty engine oil, full synthetic passenger car motor oil, some hydraulic fluids, synthetic gear oil, and EP (extreme pressure) grease,” a source observed.

Upstream, crude oil futures retreated from seven-year highs on Tuesday ahead of the resumption of indirect talks between the U.S. and Iran. There were expectations that the renewal of a nuclear agreement would eventually allow more Iranian oil exports and increase supply in the market. The talks over the nuclear deal were scheduled to take place in Vienna on Tuesday.

Oil contracts had touched seven-year highs in previous sessions, supported by strong global demand, ongoing tensions in Eastern Europe and potential supply disruptions due to cold U.S. weather conditions, CNBC.com reported.

On Feb. 8, West Texas Intermediate (WTI) March futures settled at $89.36/barrel, compared to $88.20/barrel on Feb. 1.

Brent futures for April delivery settled at $90.78/barrel on the CME on Feb. 8, from $89.16/bbl on Feb. 1.

Louisiana Light Sweet crude wholesale spot prices were hovering at $93.50/barrel on Feb. 7 and had settled at $91.31/bbl on Jan. 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.