U.S. Base Oil Price Report


The Independence Day holiday in the United States on Tuesday, July 4, resulted in fairly muted activity in the base oils market during the week, although SK Enmove did step out with a posted price decrease announcement. This initiative followed a similar one in early June, when the producer had lowered postings as well.

SK communicated that it would decrease the posted price of its Group II+ 70N grade by 5 cents per gallon and its API Group III 4 centiStoke, 6 cSt and 8 cSt cuts by 15 cents/gal, effective July 1.

Previously, the company had reduced the price of its Group II+ 70N base oil by 5 cents/gal, its Group III 4 cSt by 10 cents/gal and its 6 cSt and 8 cSt cuts by 15 cents/gal on June 1. Other suppliers had also adjusted posted prices down in June, but by higher amounts than SK – anywhere between 20 cents/gal and 35 cents/gal – which likely led to the company’s July adjustment.

Producers had hoped that the June price revisions would prompt consumers to step back into the trading scene and acquire more base oil volumes. While additional orders did come in following the decreases, business remained lackluster as blenders opted for maintaining low inventories despite the possibility of refinery output disruptions during hurricane season along the U.S. Gulf.

Finished lubricant buyers held on to hopes that manufacturers would be marking down finished lubricants and other products following the recent base oil price decreases along with ample supply. There was also talk about blenders seeking additive price decreases given that base oils – a key component in additives –

have experienced downward adjustments.

The downward price pressure on base oils and lubricants has been somewhat puzzling, as the spring and early summer months typically elicit increased buying activity, exerting upward pressure. Some observers attributed the subdued conditions to economic uncertainties and existing inventories, which were acquired when prices were steeper. Buyers seemed to be doing their utmost to draw down existing stocks before venturing back into the market.

Many base oil buyers were counting on prices moving lower on softer crude oil and feedstock prices and abundant availability, and they opted for delaying purchases for as long as possible. High refinery operating rates given hefty gasoline demand meant that more base oils would be produced versus competing distillates, as diesel margins were slimmer, particularly compared to levels seen last year.

The completion of ongoing and upcoming base oil plant turnarounds this month would also coincide with a seasonal demand slowdown, which might result in growing product availability.

A three-week turnaround scheduled at Chevron’s Group II unit in Pascagoula, Mississippi, starting in late June was expected to be completed this month. The producer was expected to meet contractual obligations during the outage, but may not have much spot availability, according to sources.

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 has also been building inventories to maintain supply during the outage.

Domestic supplies were said to be generally ample, although Group I grades appeared to be tighter. Recent export transactions of Group I and Group II cargoes have helped reduce producer inventories, with keen buying interest noted in Brazil due to production issues at local base oil plants, as well as in Argentina, Nigeria, South Africa and India. Despite economic uncertainties, consumer spending in some Latin American countries appeared quite healthy, but this was attributed to high inflation rates and consumers’ drive to acquire products before prices climbed even higher.

India has also received many U.S. cargoes in recent weeks, and market players were discussing additional shipments. A 5,500-metric ton lot made up of two base oil grades was mentioned for possible shipment from Houston, Texas, to Mumbai and/or Hazira in mid-July.

Sources commented that base oil prices in Mexico had slipped, mimicking the posted price decreases in the U.S. Some suppliers have been able to finalize business into Mexico, but other U.S. sellers preferred to either focus on domestic business or find export opportunities and more attractive pricing in other regions.

On the naphthenic base oils front, prices were stable, supported by a balanced-to-tight supply and demand scenario and strengthening crude oil prices over the week. Steady interest for U.S. pale oils from Europe and Asia bolstered prices as well.

While a number of naphthenic buyers have seen downward price adjustments over the last few weeks, this was mostly attributed to refiners’ formula prices being linked to a diesel index.

Upstream, crude oil futures jumped on an announcement by Saudi Arabia that it would extend its oil production cuts by one month into August because of persistent concerns about weaker global economic growth. Saudi Arabia’s OPEC+ ally Russia also intends to implement fresh curbs on exports. 

On July 3, West Texas Intermediate (WTI) August futures settled on the CME at $69.79/barrel, compared to $67.70/bbl on June 27. (There was no trading on July 4 due to the holiday).

Brent futures for September delivery settled on the CME at $74.65/barrel on July 3, from $72.26/bbl for August futures on June 27.

Louisiana Light Sweet crude wholesale spot prices were hovering at $73.26/barrel on June 30, from $71.29/bbl on June 26, according to the Energy Information Administration. (July 3 prices were not available by the publishing deadline).

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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