A majority of buyers have seen contract prices increase, and it appeared that spot prices were on the rise too. This situation was particularly evident in the light-and mid-viscosity base oils sectors, as these grades have tightened. Spot prices for these cuts edged up by about 5 cents per gallon, according to sources. The snug conditions appeared to be the result of plant turnarounds, reduced base oil output in favor of increased diesel production, and an uptick in export business. Diesel prices have jumped, and this has prompted refiners to reevaluate how to allocate feedstocks, with more vacuum gas oil being directed into the fuels stream.

Recent turnarounds at Chevron’s API Group II and Calumet’s Group I and Group II plants have been completed, but a Group II refiner has slated a brief turnaround for this week, and a Group I producer was planning an extended maintenance program in September.

Motiva was heard to have undertaken a brief planned turnaround at its Port Arthur, Texas, Group II and Group III plant this week. The shutdown will only affect one of the plant’s three base oil trains, which produces Group II 600N. The company had built inventories and the turnaround was not expected to have any effect on the market, sources said. There was no direct confirmation from the producer regarding the turnaround as it does not generally comment on its operations.

HollyFrontier was preparing for a 45-day turnaround at its Tulsa, Oklahoma, Group I plant next month. The producer was heard to be abstaining from offering spot cargoes in order to build inventories and has also been utilizing more of its base stocks for the company’s own lubricant production.

A few suppliers were heard to be holding limited stocks, which caused some concern among consumers as the busiest part of the hurricane season has started. Should severe weather cause supply disruptions along the U.S. Gulf Coast–where several base oil plants are located—then some product shortages could ensue, sources noted. Tropical Storm Harold hit South Texas last week and Hurricane Idalia was expected to make landfall in Florida on Wednesday, causing evacuations, airport closings and power outage alerts. Heavy rain could bring flash flooding across portions of the west coast of Florida, the Florida Panhandle, and southern Georgia, even spreading into the eastern Carolinas, according to the National Hurricane Center.

Domestic base oil producers seemed to be focusing on placing surplus into export outlets in South America, with several cargoes concluded for shipment to Brazil, Argentina and the South American West Coast. Brazilian buyers have been avid takers of U.S. cargoes as a couple of plants in Brazil were either completing turnarounds or will have maintenance in the fourth quarter. Sellers had also shipped product to South Africa at competitive price levels in the previous two months, but no reports of fresh shipments were heard this week.

Contrary to last year, when many U.S. cargoes made their way to India, this year, exports remained more regional as prices and logistics were considered to be more advantageous. The arbitrage from Asia also seemed closed for the time being, and supply in that region has also tightened, offering less incentive for Northeast Asian suppliers to ship product to deep-sea destinations in Latin America.

There were reports that buying interest from Mexico has been sluggish and fewer cargoes were moving to the neighboring country. Mexican buyers were expected to delay purchases for as long as possible as they hoped to achieve more attractive pricing in the fourth quarter, when many U.S. suppliers focus on lowering stocks. Additionally, Group I and Group II light-vis products have tightened in the U.S. and this was supporting current price indications, with suppliers less willing to adjust prices down. Nevertheless, there were some importers who have started to build inventories on expectations that prices will continue on an upward trek and that demand will pick up over the next few weeks.

Group III availability was said to be ample in the U.S., but prices seemed to have stabilized. Increased domestic output of Group III grades, together with Middle East imports from a producer that did not in the past sell into the merchant market, were changing the market dynamics for traditional Group III imports from South Korea and the Middle East. Group III producers may be trimming production rates over the next few months to avoid oversupply. Additional Group III production anticipated to come on stream in India in the fourth quarter may exacerbate the lengthening of global Group III supplies.

Naphthenic base oil prices were stable, although some spot indications have edged up as crude oil and feedstock prices have firmed compared to two months ago. Producers were monitoring market conditions and crude oil values to see if they continued on an upward trajectory to decide whether any general price adjustments were necessary. Refiners also considered trimming base oil production rates to produce more diesel and other fuels given improved margins.

The current price structure received support from a balanced-to-tight supply and demand scenario, as requirements for most naphthenic oils have been steady. Consumption of the lighter grades has been particularly robust for transformer oil and metal working fluids.

The recent strengthening of base oil prices has led to speculation that lubricant blenders would also be increasing values. There were rumblings that a major manufacturer would be revising its contract prices in September, but no official announcement was received by the publishing deadline. Independent lubricant manufacturers were heard to be evaluating the market and discussing potential price adjustments as well. They were being cautious as lubricant demand has not been particularly robust and many suppliers were worried about protecting market share. Sources also reported that there had not been any fresh additive price announcements.

Upstream, crude oil prices jumped by more than a dollar per barrel on Tuesday, despite concerns about further U.S. interest rate hikes, which could affect oil demand. Values received support from a weaker dollar after reports showed a softening labor market, and expectations of potential supply disruptions from Hurricane Idalia forming off the U.S. Gulf Coast.

On Aug. 29, West Texas Intermediate (WTI) October futures settled on the CME at $81.16/barrel, compared to $80.35/bbl for September futures on Aug. 22.

Brent futures for October delivery settled on the CME at $85.49/barrel on Aug. 29, from $84.03/bbl on Aug. 22.

Louisiana Light Sweet crude wholesale spot prices were hovering at $82.90/barrel on Aug. 28, from $83.71/bbl on Aug. 21, 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/

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