U.S. Base Oil Price Report


Base oil market participants continued to face a challenging environment, as base oils and lubricants demand remained rather lusterless, with adequate inventories and volatile feedstock prices contributing to a general downward price trend. Posted price decreases have now been implemented by a majority of producers, who were hoping that these initiatives would offer an incentive for increased order volumes before requirements start to experience a seasonal slowdown in the fall.

Consumers have been securing small cargoes to run daily operations and have tried to avoid a build-up of high-priced stocks, but the lower posted prices may encourage them to secure larger quantities. Furthermore, refiners were trying to pass softer crude oil and feedstock prices down to refined products, including base oils.

A vast majority of base oil producers and rerefiners communicated posted price decreases over the last three weeks. The initiatives resulted in decreases between 5 cents per gallon and 35 cents/gal, depending on the grade and the producer, with implementation dates sprinkled from June 1 to June 19.

Ongoing downward pressure on base oil pricing stemmed from less vigorous demand than expected during the lead-up to the summer driving season, when lubricant consumption typically jumps as more Americans take to the road. Lubricant inventories were said to be plentiful and sellers were trying to utilize existing stocks before venturing back to the market, while a delayed start of the warmer weather in some areas of the United States may have thwarted lubricant consumption, sources explained. However, lubricant inventories were expected to be exhausted soon and more blenders were anticipated to return to the market to restock.

Additionally, both buyers and suppliers were anticipated to keep extra volumes on hand in preparation for potential production disruptions caused by inclement weather, as the hurricane season has already started along the U.S. Gulf Coast, where numerous base oil plants are located.

Refineries were reported to be running at top rates, given increased demand for gasoline during the summer driving season. Gasoline demand received an additional boost from lower prices than in the previous summer, encouraging many families to drive rather than take other forms of transportation. Perhaps a sign that oil changes have increased in preparation for summer travel was the fact that used oil collection rates have jumped since May, according to rerefiners.

Base oil suppliers have been actively seeking opportunities to conclude export transactions, which would help them keep more balanced inventories. Several cargoes were expected to load this month to India, Nigeria, South Africa and Brazil, while deals into Mexico have been steady, but not particularly robust as buyers were waiting for U.S. posted prices to be reduced. The same situation was observed in Brazil, where buyers were delaying purchases on hopes of attaining lower prices for U.S. cargoes, but there was some urgency as local producers were experiencing production issues. The export transactions have helped keep Group I and Group II spot prices steady during the week, as there were fewer extra volumes available.

Fresh reports about a three-week turnaround scheduled at Chevron’s API Group II plant in Pascagoula, Mississippi, point to a start of the maintenance program in mid-June, instead of early June. The turnaround would further reduce Group II supply in the United States. The producer was expected to meet contractual obligations but may restrict spot offers during and after the turnaround.

Calumet was preparing for a routine turnaround at its Group I and Group II plant in Shreveport, Louisiana, in the second half of July. The producer was also planning to build inventories to maintain supply during the outage.

Group III supplies have shown some lengthening, as more volumes were imported to the U.S. from the Middle East, along with regular shipments from South Korea and Canada and increased domestic production in recent months. Demand, however, remained steady and imports have become more difficult to place. These conditions have resulted in lower spot indications – with Group III spot prices said to have slipped by about 10 cents/gal – and may be exacerbated when two Group III facilities in Europe and Asia that are undergoing maintenance come back on stream in July.

While the base oil posted price decreases were welcome news to blenders, the price movement also meant that lubricant buyers would be expecting lower pricing for their products as well. Aside from two formal price adjustments by major lubricant suppliers last January, there have not been any price decreases communicated on lubricants and other finished products. Nevertheless, reports circulated that major suppliers had been granting discounts into several accounts to regain market share that had been forfeited in 2022. This was the time when additive shortages and other supply chain disruptions had resulted in insufficient lubricant supply and some independent manufacturers had stepped in to fill the supply gaps.

Lubricant manufacturers were also hoping to achieve additive price decreases, as values have not been adjusted despite the rounds of base oil posted price decreases implemented in March/April and now in June.

On the naphthenic front, there were no formal price adjustments, with values largely reported as steady. Participants said that market conditions were different than those for paraffinic base oils. Balanced-to-tight fundamentals were offering support to current pricing as domestic demand, combined with healthy export requirements, were keeping inventories in check.

The light viscosity grades were in high demand from the transformer segment and were therefore described as tight, while heavier viscosities were said to be slightly more available, although demand from the asphalt segment was heard to be “in full swing.”

Some buyers have seen downward price adjustments because a number of refiners’ prices hinge on a formula linked to a diesel plus index. Since diesel prices have fallen, base oil prices have followed suit. This was putting pressure on those suppliers who do not use the same index, sources noted.

Upstream, crude oil futures slipped on Tuesday on continuing concerns about a weaker economic recovery in China than anticipated, following the lifting of strict COVID policies. The current situation placed downward pressure on crude oil prices as oil demand from China was likely to be weaker than previously expected. The People’s Bank of China lowered key lending rates to support its economic growth last week. U.S. Secretary of State Antony Blinken met with China’s President Xi Jinping earlier this week as both sides agreed that there was a need to “stabilize” the bilateral relationship between the two superpowers.

On June 20, West Texas Intermediate July futures settled on the CME at $70.50/barrel, compared to $69.42 bbl on June 13.

Brent futures for August delivery settled on the CME at $75.90/barrel on June 20, from $74.29/bbl on June 13.

Louisiana Light Sweet crude wholesale spot prices were hovering at $73.81/barrel on June 16, from $69.53/bbl on June 12, according to the Energy Information Administration. (There was no trading on June 19 due to the Juneteenth holiday).

Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.

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.

Lubes’n’Greases Publications shall not be liable for commercial decisions based on the contents of this report.

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