U.S. Base Oil Price Report

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The dust has begun to settle after a busy week of posted price announcements, although a couple of price reductions will be going into effect this week and activity was somewhat dampened by the Martin Luther King Jr. holiday on Jan. 16. As announced, Paulsboro’s decrease will be implemented on Jan. 19, and on the naphthenic base oils side, San Joaquin Refining joined other suppliers in communicating a downward price adjustment.

Paulsboro will be lowering all of its API Group I prices by 50 cents per gallon. The adjustments are reflected in the Price Table below as they go into effect this week, following a string of announcements by a majority of paraffinic producers and rerefiners.

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Suppliers decreased prices between 15 cents/gal and 60 cents/gal, depending on the product and the producer, with effective dates peppered between Jan. 1 and Jan. 16. Motiva also implemented larger adjustments of $1.35/gal and $1.95/gal on its Group II+ grades, but these revisions were an exception and intended to bring prices more in line with transaction levels, sources commented.

On the naphthenics front, San Joaquin Refining decreased posted prices on all naphthenic and aromatic oils by 30 cents/gal on Jan. 16 “due to lower crude oil values and changing market conditions,” the company explained.

Other naphthenic base oil producers – including Ergon, Process Oils (which markets Cross Oil base oils) and Calumet – had announced 20 cents/gal to 30 cents/gal decreases the preceding week, with an implementation date of Jan. 16 for all of the adjustments. Ergon and Process Oils lowered their light pale oil by 20 cents/gal and all other grades by 30 cents/gal, whereas Calumet’s decrease was 30 cents/gal across the board.

The downward adjustments came on the back of sliding crude oil and feedstock prices, as well as a need to entice buyers to take additional volumes, as many consumers hesitated to secure cargoes in view of the softer market fundamentals.

While supply continued to slightly outstrip demand, upcoming production outages were expected to help establish a more balanced scenario. Recent export transactions, including a number of cargoes to South America and India, were also anticipated to reduce the product overhang. Mexican demand for U.S. base oils has also started to pick up.

Consumers who had depleted inventories ahead of year-end have also returned to procure fresh supplies, both on the domestic front, as well as on the international arena. At the same time, Northeast Asian supplies were being offered into the Americas at competitive prices, and despite steep freight rates, a number of deals were being considered. A 4,000-metric ton parcel of Group II grades was heard in discussions to cover Daesan or Ulsan, South Korea, to Houston, Texas, in second half January or February. A second South Korean lot of 3,000 tons to 5,000 tons was on the table for lifting in Onsan, South Korea, to Houston or New Orleans, Louisiana, in Feb. A Group III base oils cargo of South Korean origin was mentioned for possible shipment to Panama this month as well.

Attractive base oil margins versus fuel values had encouraged producers to increase base oil output, with a resulting uptick in supply of the light grades. Production disruptions in the U.S. caused by a powerful winter storm during the last days of 2022 had limited impact on product availability. While most of the Group I grades appeared available, bright stock volumes were deemed balanced-to-tight against healthy requirements. Demand for the Group III grades was also generally steady, with the 4 CentiStoke grade commanding most of the buying interest.

A large Group II facility on the Gulf Coast will be taken off-line for a scheduled turnaround in late January and was anticipated to remain down for almost two months, likely crimping spot availability. A second Group II producer will also be performing maintenance work in the first quarter. A third Group I and Group II producer was considering a two week-turnaround starting at the end of March.

In the naphthenic base oils segment, San Joaquin Refining will be installing a a new vacuum distillation tower at its refinery in Bakersfield, California, starting later this month, and expects the unit to be down for four weeks.

The fresh downward base oil price adjustments encouraged downstream buyers to request price reductions for lubricants and finished products. While some suppliers appeared willing to adjust pricing, additive suppliers were less likely to offer decreases on account of lingering product tightness.

Market participants were keeping an eye on crude oil values since they have been somewhat volatile over the last few days, swayed by economic data and supply and demand predictions. A slowing global economy, China’s erratic behavior towards the COVID pandemic and a stronger dollar have brought the price of oil down more than 20% in the last six months, and values continued to fluctuate week on week, media sources reported.

The Energy Information Administration forecast that oil production in the U.S. will rise from 11.86 million barrels daily in 2022 to 12.4 million barrels daily this year, according to OilPrice.com. The EIA expects U.S. shale drillers to ramp up production despite predictions that oil prices would decline over the next two-year period.

Crude oil futures started the holiday-shortened week posting lower numbers as traders took profits from last week’s rally and waited for OPEC and the International Energy Agency market forecasts coming out later this week. Prices edged up later in the day on Tuesday on expectations of an uptick in Chinese crude demand as economic data showed marginally more growth in 2022 than expected.

On Jan. 17, West Texas Intermediate February futures settled on the CME at $80.18/barrel, compared to $75.12/bbl on Jan. 10.

Brent futures for March delivery settled on the CME at $85.92/barrel on Jan. 17, from $80.10/bbl on Jan. 10.

Louisiana Light Sweet crude wholesale spot prices were hovering at $82.70/barrel on Jan. 13, from $76.19/bbl on Jan. 9, according to the Energy Information Administration. There was no trading on Jan. 16 due to the Martin Luther King Jr. holiday.

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.

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