Paulsboro will be decreasing its Group I base oils by 20 cents/gal, with an effective date of Dec. 13. The Price Table below will reflect this price change next week when the adjustment takes effect.

On Nov. 21, Chevron lowered its Group II 100R grade by 30 cents per gallon, and its 220R and 600R base oils by 35 cents/gal.

Motiva had communicated a 30 cents per gallon 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 remained unchanged.

Excel Paralubes communicated a 30-cents per gallon posted price decrease on its Group II 70N and 110N grades, and a 50-cents/gal decrease on its 220N and 600N grades, effective Dec. 1.

SK Enmove informed customers that the company would be decreasing its Group II+ 70N grade by 10 cents/gal and all of its Group III grades by 15 cents/gal, with an effective date of Dec. 1.

Calumet lowered its Group I SN600 and bright stock grades by 20 cents/gal; its Group II 60N, 75/80N, 100N, 150N cuts by 30 cents/gal, and its Group II 325N cut by 50 cents/gal, with an effective date of Dec. 6. The price adjustments are reflected in this week’s Price Table below.

ExxonMobil will decrease its Group I grades by 20 cents/gal, and its Group II EHC65 and Group II+ EHC45 grades by 15 cents/gal on Dec. 8 (The company’s Group II EHC 120 grade will be lowered by 20 cents/gal, but this posting is not listed on the Price Table below). The Price Table below has been revised to reflect these changes as they go into effect later this week.

Base oil demand tends to slow down towards the end of the year, and it is not unusual for suppliers to lower prices in order to motivate buyers to secure additional volumes beyond those specified in contracts, helping suppliers keep inventories in check. For the last several weeks, lubricant manufacturers had been requesting discounted base oil prices as they have encountered difficulties in implementing increases meant to offset base oil price increases announced back in August and September.

Spot prices have also been under pressure as availability mounted and suppliers sought opportunities to export to destinations such as Brazil and India. Exporters were facing domestic price competition in those countries and spot indications have therefore fallen by a few pennies to about 15 cents/gal, depending on the grade. Some Group I heavy grades such as bright stock have been imported in recent weeks and this added to the price pressure on the heavy-viscosity grades.

The Group III base oils experienced the largest downward adjustments as supplies were deemed plentiful. Growing domestic output, together with additional Middle Eastern material being offered into the U.S. from a supplier that had not typically sold into the commercial market in the past, resulted in more product having to be absorbed. Logistical issues related to vessels crossing the Panama Canal have led to shipment delays and this was seen as a hurdle for cargoes looking to be exported from Asia to the U.S. Gulf or East Coast South America.

The new Mexican import regulations that require a special permit to move base oils to Mexico were also expected to free additional U.S. volumes as light grades that were used for fuel blending will be blocked from entering Mexico. Sources estimated that at least 15% of overall exports into Mexico might be affected, but this remains to be seen. Due to the new regulations, business into Mexico “is not going back to what it was,” a source commented. Meanwhile, it was heard that a number of producers had lowered prices of base oils at the border in order to encourage more purchases from Mexican lubricant manufacturers.

Exports to Brazil continued unabated and were expected to remain strong in the short term as the Brazilian producer Petrobras was completing a turnaround at one of its key facilities. While the producer was anticipated to start shipping out product this month, there were still a few pockets that were expected to be short on product and buying appetite for U.S. base stocks was likely to continue. This interest had relieved some of the pressure that U.S. base oil suppliers experience at the end of the year when inventories start to mount, particularly in the Group II realm.

Aside from rising supplies and softening demand, there was an added element this year that prompted the U.S. posted price decreases, and that was the fall of crude oil prices as numbers have slipped from the steep levels seen just a few weeks ago. In early October, West Texas Intermediate crude oil prices had jumped to the mid $80s per barrel following the start of the Israel-Hamas conflict on Oct. 7 on fears that the hostilities would spread to oil-producing countries in the Middle East. Prices had also been high in September at close to $90/bbl, and that is when base oil posted price increases had been implemented.

However, WTI values have fallen to the mid- to low $70s/bbl. According to OilPrice. com, “macroeconomic factors continue to weigh on oil prices, despite the insistence of OPEC+ members that the group’s production cuts will tighten the oil market.”

Crude oil futures slipped during a volatile trading session on Tuesday as a stronger U.S. dollar and concerns about weakening demand offset supply worries following Russia’s assertion that OPEC+ might deepen output cuts in the first quarter of next year, despite already announced curbs last week. Russian President Vladimir Putin was expected to visit OPEC members the United Arab Emirates and Saudi Arabia on Wednesday and host Iranian President Ebrahim Raisi in Moscow on Thursday. The oil demand concerns were fueled by discussions at the COP28 climate conference that called for a formal phase-out of fossil fuels, and by the rating agency Moody’s lowering of China’s economic outlook to negative.

On Dec. 5, WTI January futures settled on the CME at $72.32/barrel, compared to $76.41/bbl on Nov. 28.

Brent futures for February delivery settled on the CME at $77.20/barrel on Dec. 5, from $81.68/bbl for January futures on Nov. 28.

Louisiana Light Sweet crude wholesale spot prices were hovering at $75.78 barrel on Dec. 4, from $77.96/bbl on Nov. 27, according to the Energy Information Administration.

Lower crude oil and feedstock prices also placed downward pressure on naphthenic base oil values. Formula-based contracts tied to a diesel index saw decreases over the last few weeks given lower diesel values, but suppliers have not issued general price announcements as supply and demand remained balanced-to-tight.

Consumption the heavier naphthenic grades has softened as expected for this time of the year and it may see a deeper slump this month as some downstream plants shut down for maintenance and holidays, sources said. Demand for the lighter grades, on the other hand, was still healthy, particularly from the transformer oil segment.

Naphthenic base oils export business to Europe, Asia and Latin America remained steady, helping support pricing. Shipments into Mexico that had been detained at the border due to the new import regulations were gradually moving to their destinations as new temporary import permits were being processed.

San Joaquin Refining was expected to restart its naphthenic base oils plant in Bakersfield, California, on Dec. 8, following a planned turnaround that started on Nov. 13. The producer was able to meet contract obligations during the shutdown but was unlikely to have extra availability of 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. The producer was expected to meet contractual requirements during the outage and was likely to start building inventories ahead of the shutdown.

The lackluster conditions seen over the last several months in base oil segments were also evident in downstream lubricant and finished product markets. Economic uncertainties, inflation and climbing transportation and packaging costs led to wavering demand and this had made it more difficult for blenders to implement the intended increases of 10%-18% in mid-October or early November meant to offset August and September base oil posted price increases. With base oil prices moving down in late November and early December, some of the increase initiatives have been partly relinquished, although some buyers did see the implementation of small increases with revised amounts.

Additive producers had also nominated price increases between 6% and 12% for mid-November and early December implementation, but they were facing buyer resistance due to ample availability of additives, sluggish demand and downward base oil price adjustments in late November through early December.

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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Historic and current base oil pricing data are available for purchase in Excel format.