U.S. Base Oil Price Report


Following the implementation of posted price increases during the second half of September, price action within the base oils market has turned quiet—at least for the time being. Industry participants kept an eye on crude oil, feedstock and fuel values, as these have been affecting refinery decisions and production rates, aside from placing unremitting pressure on base stock pricing. Higher diesel prices have offered an incentive for refiners to produce more distillates in detriment to base oil output, and this has led to a tightening of certain grades.

Crude oil futures have by and large been on an upward trek since July. On Tuesday, prices fell in early trading to three-week lows on a strong dollar and expectations of reduced demand in China, Europe and the United States, but recovered later in the day on forecasts of reduced U.S. crude stockpiles.

China, in particular, was expected to cut back on oil imports, use existing reserves and increase exports of higher-value refined products. The prospects of lower crude demand capped gains, despite ongoing production curbs by OPEC+ members.

On October 3, West Texas Intermediate November futures settled on the CME at $89.23/barrel, compared to $90.39/bbl on Sept. 26.

Brent futures for December delivery settled on the CME at $90.92/barrel on Oct. 3, from $93.96/bbl for November futures on Sept. 26.

Louisiana Light Sweet crude wholesale spot prices were hovering at $90.66/barrel on Oct. 2, from $90.61/bbl on Sept. 25, according to the Energy Information Administration.

The base oil posted price initiatives implemented in September raised most API Group I prices by 20 cents/gal, with the exception of bright stock, which was left unchanged. Group II prices were generally lifted by 15 cents/gal, 25 cents/gal, 30 cents/gal; and Group II+/Group III prices by 15 cents/gal, 20 cents/gal and 30 cents/gal, with all the increases going into effect between Sept. 15 and Sept. 25.

Current base oils supply and demand conditions were described as fairly balanced, although some segments of the market such as the Group III category showed some lengthening on account of increased domestic production, ample imports from Asia and the Middle East, and sluggish demand. Group III suppliers have adjusted the volumes brought into the United States to avoid a significant product overhang and downward price pressure. Spot prices had slipped in the previous weeks given more than adequate supply but seemed to have stabilized this week.

The Group I segment was described as balanced-to-tight due to reduced base oil output at some refineries in favor of increased distillates production and an ongoing turnaround at HollyFrontier’s Group I plant in Tulsa, Oklahoma. The unit was taken down for a 45-day maintenance program last month. While the producer had limited its spot sales ahead of the turnaround to build inventories, it was not expected to offer volumes beyond those agreed under contract in the next few weeks.

Within the Group II sector, a producer was heard to be restricting its sales in order to rebuild inventories following unplanned production issues. Although a number of Group II plants had undergone turnarounds in recent months, supply was deemed plentiful to meet current domestic requirements.

Suppliers have also been able to finalize several export transactions – including shipments to Europe, Brazil and Mexico – which have helped keep U.S. inventories in check. Ongoing and imminent production shutdowns in Brazil were expected to keep buying interest in U.S. base oils buoyant over the next few weeks.

Domestic base oil demand has been steady but not particularly robust given uncertainties in downstream markets. According to suppliers polled regarding base oil consumption, the September posted price increases seemed to have had little effect on orders. Some sellers expected buyers to start using up inventories that had been padded ahead of the start of the hurricane season, which could curb requirements moving forward. At the same time, prospects of lubricant price increases in late October to November might trigger an uptick in finished product orders as buyers try to beat the increases, and this, in turn, could translate into additional base oil demand.

On the naphthenic base oils front, producers also increased prices by 25 cents/gal and 30 cents/gal in September on the back of steep crude oil and feedstock prices and higher diesel values. Suppliers reported balanced-to-tight supply and demand fundamentals, with the lighter pale oils and transformer oils said to be particularly sought-after.

Healthy buying interest for U.S. naphthenic products from South and Central America and Asia also propped prices up.

Downstream, there were reports that finished lubricant manufacturers intended to raise prices in late October or early November to reflect the recent base oil price increases, despite a certain degree of hesitation as some suppliers were concerned about further dampening demand and the possible loss of market share. Nevertheless, the mounting cost pressures—not only from climbing base oil prices, but also from steeper additives, packaging, and freight values–made it necessary for lubricant manufacturers to transfer the increases down the supply chain.

Several manufacturers announced increases over the last couple of weeks, including Smitty’s Supply, US Global Petroleum, CAM2 International, Pinnacle Oil, and Pennstar. The increases would raise prices up to 12-18% for lubricants and greases, and up to 9% for brake fluids, and were expected to be implemented in the second half of October.

This week, Omni Specialty Packaging announced a price increase of up to 10% on all automotive lubricants, chemicals and brake fluids, with an effective date of Oct. 27.

Advanced Lubrication Specialties also communicated a lubricants price increase of up to 15%, effective Oct. 30.

There were also reports that ExxonMobil intended to increase its lubricants by up to 10% on Nov. 1, and SOPUS – a subsidiary of Shell USA – was expected to raise its lubricants prices by 15% on the same date.

Market participants were preparing to meet at the Independent Lubricant Manufacturers Association’s annual meeting Oct. 7-10 in Palm Desert, California, where among other topics, there will be discussions about current and future lubricant market trends.

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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