U.S. Base Oil Price Report

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Two paraffinic base oil producers nominated posted price increases with effective dates this week, while naphthenic markups were in the process of implementation. The increases did not come as a complete surprise, as margins have been pressured by the escalating costs of crude oil, feedstocks, transportation, labor and other factors.

Motiva communicated a price increase of 20 cents per gallon for its API Group II aramcoPRIMA100, 35 cents/gal for its aramcoPRIMA 220, and 25 cents/gal for its aramcoPRIMA 600 grades. The company’s Group III aramcoULTRA 4 (centiStoke) will be raised by 35 cents/gal, its aramcoULTRA 6 (cSt) by 20 cents/gal, and its aramcoULTRA 8 (cSt) by 35 cents/gal, all with an effective date of February 15.

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Chevron announced a posted price increase of 20 cents/gal for its Group II 100R and 220R grades, and 15 cents/gal for its 600R grade to “reflect market conditions,” the company explained. The effective date of the increases is also Feb. 15.

Last week, Ergon, Cross Oil, Calumet and San Joaquin Refining implemented 25 cents/gal price increases for naphthenic oils across the board, with the first three producers’ price hikes going into effect on February 11 and San Joaquin’s on Feb. 8.

The increases on both sides of the market were fueled by the relentless climb in feedstock prices and other costs, coupled with a fairly tight supply and demand scenario, due partly to plant turnarounds in the case of the naphthenic oils.

The supply and demand situation on the paraffinic front was mixed, with some grades such as the light Group I and Group II cuts less available than the heavier cuts. In the Group III segment, the 8 cSt has shown more plentiful supply over the last few months than the 4 cSt and the 6 cSt.

Spot pricing of the paraffinic base stocks has weakened over the last several weeks because of ample availability of certain grades vis-à-vis lackluster requirements, with the decline appearing particularly evident for the mid and heavy-viscosity base oils. The heavy grades in both the Group I and II segments saw decreases between 10 and 15 cents/gal week on week, while the Group III grades have softened by around 5 cents/gal.

Suppliers reduced spot pricing for export transactions in an effort to place product into Mexico, India and South America, where competition with Asian and European suppliers had strengthened. A 22,000-metric ton shipment of base oils was expected to be completed from the U.S. Gulf to India in the first half of March, and other export opportunities were being worked on.

Domestic demand has yet to pick up the pace, with a shortage of additives mentioned as one of the factors affecting buying appetite from downstream manufacturers, as operating rates at blending plants were still down.

Refiners have also cut back base oil operating rates as a means of managing supply, and in some cases, opted for redistributing feedstocks at the refining level to produce more fuels and fewer base oil volumes. 

Meanwhile, most naphthenic grades were fairly tight on the back of ongoing and upcoming turnarounds, but the light grades seemed more strained than their heavier counterparts. Since producers had been preparing for the downtime, they had restricted the volumes going into the spot market.

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 barrels per day of naphthenic base oils, according to Lubes’n’Greases’ Base Oils Plant Data.

San Joaquin started a turnaround at its Bakersfield, California, refinery on Feb. 12. 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, refinery in March. The producer will be taking the crude unit and vacuum tower down for a few days, but will continue to run the hydrotreater. Base oil availability should not be impacted, the company said. The base oil plant at the site has a capacity of 5,000 b/d of naphthenic base oils.

Raw material supply shortages and climbing costs continued to plague downstream finished lubricants and grease manufacturing. In the latest round of increase announcements, two lubricant producers stepped out with markups of up to 15% on finished lubricants, effective March 1, while two additional producers have announced a similar hike of up to 15%, with effective dates of March 7 and March 16. These announcements come on the heels of previous initiatives of up to 16% increases for implementation between December 2021 and February 2022. The higher prices were stoked by the climbing costs of raw materials – particularly base oils and additives –  freight, labor and packaging.

Two major additive producers had also 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, leading to scaled-back production rates at blending facilities and a lack of a number of finished lubricants on the shelves. The situation was not expected to improve much until at least the middle of the second quarter.

Upstream, crude oil futures jumped to their highest in more than seven years on Monday on signs that a Russian invasion of Ukraine was imminent, but retreated significantly on Tuesday after Russia said some of its military units were returning to their bases following exercises near Ukraine, a move that appeared to de-escalate tensions between Moscow and the West, Reuters reported.

On Feb. 15, West Texas Intermediate (WTI) March futures settled at $92.07/barrel, compared to $89.36/barrel on Feb. 8.

Brent futures for April delivery settled at $93.28/barrel on the CME on Feb. 15, from $90.78/bbl on Feb. 8.

Louisiana Light Sweet crude wholesale spot prices were hovering at $97.97/barrel on Feb. 14 and had settled at $93.50/bbl on Feb. 7, 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.