U.S. Base Oil Price Report


Chevron and Motiva communicated posted price decreases during the week, reflecting falling crude oil and feedstock prices and softening base oil demand. It is not unusual for suppliers to adjust prices in the last few weeks of the year as they strive to encourage additional order volumes and reduce inventory levels. Business was otherwise muted in the United States this week due to the Thanksgiving holiday on Nov. 23, and ahead of the ICIS Pan American Base Oils conference being held in New Jersey Nov. 29-Dec. 1.

Chevron informed customers that the company would be decreasing its API Group II 100R grade by 30 cents per gallon, and its 220R and 600R base oils by 35 cents/gal, with an effective date of Nov. 21, “to reflect current market conditions,” according to a company communication.

Motiva communicated a 30 cents/gal decrease on its Group II 100N grade and 50 cents/gal on its 220N and 600N grades, effective Dec. 1. Postings for the company’s Group II+ and Group III grades will remain unchanged. The price adjustments will be reflected in the Price Table below next week, which is when they go into effect.

With the exception of SK Enmove, which had decreased posted prices on Nov. 1, there had not been any changes to postings since September, when a vast majority of producers had announced price increases. At that time, West Texas Intermediate crude oil prices were hovering slightly above $90 per barrel. Oil prices also experienced a short-lived spike in early October, following the start of the Israel-Hamas war on fears that the conflict would spread to other nations in the Middle East and affect oil supply. Values have since plummeted to levels in the mid to upper $70s/bbl as tensions in the oil-producing region seemed to be abating, with a hostage deal between Israel and Hamas appearing to be edging closer.

Oil futures slipped on Tuesday, reversing steep gains made in the previous two sessions, as investors turned cautious ahead of an OPEC+ meeting this Sunday when the group was expected to discuss maintaining or increasing supply curbs, given slowing global economic growth, Reuters reported.

On Nov. 21, WTI January futures settled on the CME at $77.77/barrel, compared to $78.26/bbl for Dec. futures on Nov. 14.

Brent futures for January delivery settled on the CME at $82.45/barrel on Nov. 21, from $82.47/bbl on Nov. 14.

Louisiana Light Sweet crude wholesale spot prices were hovering at $81.30/barrel on Nov. 20, barely changed from $81.31/bbl on Nov. 13, according to the Energy Information Administration.

Base oil suppliers were contending with lengthening supplies and lackluster demand as consumption tends to slow down towards the end of the year because buyers prefer to reduce inventories to avoid taxes on idle stocks. Lubricant demand also declines. In 2023 in particular, base oils and lubricants consumption has been lukewarm throughout the year, as consumers have treaded cautiously given economic uncertainties, inflation and geopolitical tensions, which affected not only crude oil and raw material prices, but also labor, transportation, packaging and other costs.

When crude oil prices started to lose ground in October, blenders had made overtures towards achieving temporary voluntary allowances or special discounts, as they were facing resistance to proposed finished products increases aimed at offsetting August and September base oil price increases. Base stock suppliers had been reluctant to grant TVAs or discounts because they needed to maintain margins in order to uphold base oil production rates versus distillates. However, softer domestic demand and growing spot supplies had already resulted in Group I and Group II spot prices edging down by around 5 cents per gallon to 12 cents/gal over the last week.

One positive element for U.S. suppliers to compensate for lackluster demand at home has been the healthy buying appetite seen from export markets such as Mexico, Brazil and other Latin American nations, although recent business transactions into Mexico had been disrupted by new government restrictions on base oil and lubricant imports. The new rules require importers to obtain a license to import fuels and petrochemicals, with the exception of gasoline and diesel. These restrictions had discouraged some potential export transactions. While a number of U.S. shipments had been detained at the border for several days, waiting for licenses to be processed, there were reports that temporary permits had been granted and many of these cargoes were now on their way to their intended destinations in Mexico.

Brazilian buyers continued to show persistent interest in U.S. imports as recent production issues at a domestic producer’s plant and an ongoing, prolonged turnaround at a key refinery were limiting the local supplies of base oils. Aside from U.S. parcels, there were reports of South Korean cargoes having been discussed for shipment to Brazil, but shipments from Asia were facing increased rates and difficulties in sailing through the Panama Canal to the East Coast of South America due to congestion caused by a closure of the canal earlier this month. Shipments from the U.S. Gulf to the West Coast of South America encountered similar issues. Nevertheless, a 2,650-metric ton cargo was expected to be shipped from South Korea to Rio de Janeiro on the next available date.

Asian shipments to the West Coast of South America were still workable, with at least 6,800 tons expected to be shipped from South Korea to Ecuador this month.

Some base oil grades have tightened in the domestic market because of recent planned and unplanned outages. A 45-day turnaround at HollyFrontier’s Group I unit in Tulsa, Oklahoma, which was completed in early November, strained spot availability of Group I grades. An unexpected brief shutdown at a key Group II facility also affected Group II supplies. Group III volumes were deemed plentiful on increased availability from the Middle East and Asia. Several cargoes of Group III cuts without approvals have been sold, but a majority of blenders still seek product with full approvals. Domestic production of Group III grades has also increased.

The heavier grades in particular were facing heightened price pressure because of recent imports from Europe, South Korea and the Middle East at a time when domestic consumption of these grades has weakened on seasonal factors.

On the naphthenic base oils front, demand for the heavier grades has declined, while the lighter cuts were still seeing brisk activity in the transformer oil segment. The fall in crude oil and feedstock prices was placing downward pressure on naphthenic base oil values, more so than on paraffinic prices as refinery operations are more directly impacted by crude prices. Formula-based contract prices tied to a diesel index have slipped in recent weeks.

Export business to Europe, Asia and Latin America was healthy, although there were pockets that have weakened ahead of the year-end holidays. Shipments into Mexico that had been blocked from entering the country were expected to be cleared in the next couple of weeks as temporary permits were being processed. However, given that this process has strained import volumes, prices for U.S. products have strengthened.

The supply and demand balance has been partly tipped to the snug side, particularly for the light grades, by a brief unexpected production outage at one plant in late October, and an ongoing turnaround at another unit, which started last week.

San Joaquin Refining began a three-week turnaround at its naphthenic base oils plant in Bakersfield, California, on Nov. 13. The producer was anticipated to meet contract obligations, but was unlikely to have extra availability of its light grades after the maintenance program. The turnaround was also expected to help the producer manage inventory levels of the heavy grades. San Joaquin has not scheduled any turnarounds in 2024.

Calumet plans to have a turnaround at its naphthenic base oil unit in Princeton, Louisiana, in the first quarter of next year. In order to fulfill requirements during the outage, the producer was expected to start building inventories ahead of the shutdown.

In downstream markets, some manufacturers have already raised their prices in the second half of October or first half of November as they needed to recoup August and September base oil posted price increases, along with higher packaging and transportation costs. Others were still negotiating price adjustments with their customers. The increase implementation has been an uphill battle as buyers have resisted the higher prices, and some blenders have partly lost market share because they had no other choice than to implement the hikes.

Independent manufacturers had announced increases of up to 10-18% on lubricants and greases, and up to 9% for brake fluids, with effective dates between Oct. 16 and Oct. 30. Major suppliers had communicated increases on lubricants of up to 10% to 15% for early to mid-Nov. implementation, but some of them have negotiated lower markups.

Blenders were also resisting additive increases, slated to be implemented in mid-November and early December. Additive suppliers were hoping to push through price increases due to inflation and the higher cost of base oils and transportation, with one lubricant additive producer communicating markups of up to 8%, effective Nov. 15, and a second additive manufacturer expected to mark up prices by up to 10%-12% in mid Nov. as well. A third additive manufacturer communicated an increase of up to 6%, effective Dec. 1.

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.

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