U.S. Base Oil Price Report


A few participants were surprised to hear reports that ExxonMobil had communicated a posted price increase this week. The company will be raising postings on Aug. 4, and the price hike was thought to be mostly driven by steeper crude oil and feedstock prices.

With refineries operating at top rates given buoyant gasoline demand, and diesel prices regaining some ground, sources speculated that producers may have to justify base oil production by raising prices and improving margins.

According to reports, ExxonMobil will be increasing its API Group I SN100/150 by 25 cents per gallon, its SN400 by 30 cents/gal and its SN800 and bright stock by 20 cents/gal. The company will also raise its Group II EHC65 (220 vis) by 30 cents/gal and its Group II+ EHC45 (150 vis) by 25 cents/gal. The EHC120 grade, which is not included in the price table below, will go up by 30 cents/gal. As mentioned above, the increases will go into effect on Aug. 4.

Paulsboro will also be marking up its Group I posted prices on Aug. 9. The company’s Group I SN100 and SN165 grades will be adjusted up by 25 cents/gal, and its SN500, SN700, and bright stock will move up by 20 cents/gal. The adjustments will be reflected in the Price Table below next week, which is when the increases go into effect.

Given the recent jump in crude oil and vacuum gas oil values, it was not completely unexpected to see producers trying to maintain margins, but some players noted that base oils demand has not been as robust as expected during the spring and summer, and wondered whether price increases would cripple sales further. Several suppliers were heard to be evaluating market conditions and had not communicated any price adjustments by the publishing deadline.

While crude oil futures had been on an upward trek over the last two weeks and have surpassed the $80 per barrel mark, they dipped slightly on Tuesday on a stronger dollar and downbeat news about the Chinese economy–the world’s second-largest after the United States’. But prices received support from American Petroleum Institute (API) data that showed U.S. oil inventories had unexpectedly fallen by 15.4 million barrels this week, after increasing by 1.319 million barrels in the previous week, according to OilPrice.com.

On Aug. 1, West Texas Intermediate (WTI) September futures settled on the CME at $81.37/barrel, compared to $79.63/bbl on July 25.

Brent futures for October delivery settled on the CME at $84.91/barrel on Aug. 1, from $83.64/bbl for September futures on July 25.

Louisiana Light Sweet crude wholesale spot prices were hovering at $83.90/barrel on July 31, from $81.31/bbl on July 24, according to the Energy Information Administration.

Base oil buying patterns have diverged from previous years, with buyers displaying a more cautious attitude and securing smaller volumes. This was partly attributed to healthy existing inventories and lackluster demand for finished lubricants and other products. This, in turn, was thought to be linked to inflation and concerns about a potential economic recession in the U.S. earlier in the year, coupled with weak economic indicators in other nations as well.

Some of these concerns have started to dissipate as U.S. inflation has declined, but there were still many uncertainties plaguing the base oils and lubricants industry, such as changes in the makeup of the automotive parc and the advance of car electrification. Experts explained that large investment is required to adapt to the changing requirements and not all lubricant manufacturers were in a position to make those changes.

At the same time, the industrial lubricant segment remained strong and demand from that sector has been growing steadily, according to sources.

Most base oil grades were heard to be available in the U.S., although the heavier grades, including Group I bright stock, were slightly longer than their lighter counterparts. There was also increased upward pressure on the Group II light grades given the recent climb in diesel prices.

Suppliers were working on export transactions, with buying interest in Brazil and destinations on the West Coast of South America described as steady, but domestic prices were more attractive and therefore, suppliers were also trying to capture more volumes at home. A number of suppliers have offered temporary value allowances or adjustments (TVAs) into a few large accounts to promote orders.

There were reports that several Group I cargoes had been sold to Mexico, but buyers’ price ideas there were considered too low by some U.S. suppliers. Expectations that more competitively-priced Group II cargoes from Asia might find takers in Mexico might trigger some long-haul shipments in the coming weeks.

Downward price pressure on Group III base oils persisted on plentiful availability from South Korea and the Middle East, and expectations of increased domestic supplies from a domestic producer.

In terms of base oil production, Chevron’s Group II unit in Pascagoula, Mississippi, was heard to have restarted following a turnaround and catalyst change which began in late June. The producer had built inventories to cover contractual requirements during the outage but had restricted its spot offers. It is expected to return to spot trading as soon as it has rebuilt inventories, according to sources.

Calumet was expected to complete a routine turnaround at its Group I and Group II plant in Shreveport, Louisiana, which started in late July, but the maintenance will only affect the unit that produces the light viscosity grades, the producer said. Calumet has also been building inventories and expected to meet contractual obligations during the shutdown.

On the naphthenic side of the business, producers were also heard to be monitoring market conditions to decide whether any price adjustments were needed. Prices for those accounts whose contracts are linked to a diesel index have fluctuated according to changes in diesel values.

Demand for most pale oils was steady, with the light grades in particular enjoying healthy consumption in the transformer oil segment. While export requirements from Europe have slowed down slightly on account of a recent heat wave and the summer holidays, there was still keen buying interest from Asia.

In downstream segments, lubricant manufacturers were heard to be granting discounts to protect market share and promote fresh sales. Lubricant demand has been lackluster over the last couple of months, and sellers appeared to be well-covered product wise. At the same time, rumblings that base oil prices would be increasing prompted some blenders to return to the market last week and place orders ahead of a potential general price increase in raw materials.

Meanwhile, additive manufacturers have also implemented discounts in the realm of 3% to 4% into select accounts to reflect the June posted base oil price decreases.

In other industry-related news, Yellow Corp., the nearly century-old trucking company, is closing its doors as the company has been struggling with huge amounts of debt and will be laying off all of its 30,000 workers. “Yellow’s collapse into bankruptcy marks the end of an era in trucking,” CNN.com noted in an article on July 31. Yellow Corp. is one of the nation’s largest so-called “less-than-truck load” carriers and serves large customers such as Walmart and Home Depot. The shutdown of a transportation company that offered competitive freight rates may prop up industry rates that tumbled after the cargo bubble of the early coronavirus pandemic deflated last year, analysts at MarketScreener.com commented.

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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