U.S. Base Oil Price Report


The Labor Day holiday on Sept. 4 marked the end of the summer driving season and the period when demand for lubricants was likely at its highest. While base oil suppliers prepared for a slowdown in consumption, they also expected a small uptick in requirements from consumers who have depleted inventories and needed to return to the market to replenish stocks, particularly as buying has been diffident for most of the year. Some buyers also tend to postpone purchases until the fourth quarter, when prices tend to come under pressure, depending on supply fundamentals and crude oil and feedstock costs.

Many participants worried about potential supply issues as August and September are the most active months in terms of hurricanes and tropical storms along the United States Gulf Coast, where many base oil facilities are located. Last week, Hurricane Idalia brought a storm surge, strong winds and flooding in Florida, Georgia and the Carolinas, but no production disruptions were reported.

Despite fairly sluggish base oil demand trends since the beginning of the year, a number of paraffinic base oil producers appeared to be in balanced-to-snug supply conditions. This was attributed to recent and ongoing turnarounds, export transactions and reduced base oil output in favor of fuels production at some refineries. Diesel margins have strengthened, and demand has been robust, driving offers for the light viscosity base oil grades to higher levels.

Chevron and Calumet completed turnarounds in the previous two months, and  

Motiva had scheduled a brief turnaround at its Port Arthur, Texas, API Group II and Group III plant last week. However, the shutdown only affected one of the plant’s three base oil trains, which produces Group II 600N. The turnaround was not expected to have had any effect on availability as other suppliers had plentiful supplies, sources said. There was no direct confirmation from the producer regarding the turnaround as it does not generally comment on its operations.

HollyFrontier will be shutting down its Group I plant in Tulsa, Oklahoma, for a 45-day turnaround in mid-September. The producer has limited its spot offers in the weeks leading up to the turnaround in order to build inventories and had also been utilizing more of its base stocks for the company’s own lubricant production, which has contributed to an overall tightening of Group I grades.

 A couple of rerefining units will also undergo scheduled maintenance over the next few weeks.

Following posted price increases in the first half of August, postings remained stable, while spot export prices for the Group I and Group II grades inched up by between 3 cents per gallon and 15 cents/gal on account of tightening supply and demand fundamentals and higher offers from sellers.

Spot export prices for Group I and Group II base oils have strengthened because of the more limited supplies combined with keen buying interest from Brazil and other South American countries. With a couple of plants in Brazil either currently undergoing a turnaround, or preparing for one, base oil consumers have been concerned about securing sufficient raw materials to continue producing lubricants over the next few months.

There has also been an uptick in demand from Mexico – where buying activity had been lethargic – as buyers were seeking light grades for fuel blending. Some buyers preferred to wait for prices to be revised in the last quarter of the year, but others have used up existing inventories and needed to return to the market to place fresh orders.

Group III prices were fairly steady, although numbers remained exposed to downward pressure given plentiful supplies and additional domestic production this year. Importers were heard to be planning to reduce volumes shipped to the United States in the coming weeks to minimize price pressure. Additionally, supply in Asia might be tightening on ongoing turnarounds and reduced operating rates at some refineries, which might result in more limited supplies.

Naphthenic base oil prices were stable on balanced-to-tight supply and demand fundamentals and firm crude oil and feedstock prices. Accounts whose contracts are linked to a diesel index have seen increases given the upward trend in diesel prices. Suppliers have also introduced some increases into select accounts, depending on contract terms. Producers were still mulling general price adjustments and were watching crude oil price developments closely, particularly as values were on the rise again this week.

The light pale oils were enjoying steady attention in the transformer oils segment and availability was more strained than for the heavier grades, but all naphthenic grades were seeing healthy demand for export to Europe, Latin America and Asia. Suppliers said they were preparing for a softer fourth quarter and acknowledged that demand had not been particularly strong in any segment this year, especially compared to 2021 and 2022.

In downstream markets, it was still unclear whether lubricant manufacturers intend to adjust prices, following the base oil posted price increases implemented in August. There were reports of buyers requesting temporary value allowances from base oil suppliers since they were facing resistance to their price increase efforts from their own finished lubricant customers, but there were no reports of producers agreeing to the TVAs.

Lubricant demand was expected to decline over the next few weeks, with the exception of orders from consumers who may decide to beat potential price increases and place orders ahead of any upcoming initiatives.

Base oil producers continued to keep a close eye on crude oil and feedstock prices, as they remained on an upward trend. The benchmarks jumped on Tuesday on expectations that OPEC+ would extend its curb on supply to support prices, and on speculation that the U.S. Federal Reserve would ease its ongoing interest rate hikes. Oil prices surged to their highest level since November, after Saudi Arabia and Russia extended their voluntary supply curbs to the end of the year, fueling concerns about potential shortages during the winter months in the Northern Hemisphere.

On September 5, West Texas Intermediate (WTI) October futures settled on the CME at $86.69/barrel, compared to $81.16/bbl on Aug. 29.

Brent futures for November delivery settled on the CME at $90.04/barrel on Sep. 5, from $85.49/bbl for October futures on Aug. 29.

Louisiana Light Sweet crude wholesale spot prices were hovering at $87.82/barrel on Sep. 1, from $82.90/bbl on Aug. 28, according to the Energy Information Administration (There was no trading on Sep. 4 due to the Labor Day 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.

Related Topics

Base Oil Reports    Base Stocks    Market Topics    Other