U.S. Base Oil Price Report


Motiva and Petro-Canada communicated a posted price decrease on their Group II+ and API Group III postings, completing the price revisions that the companies had initiated earlier this month. These announcements also seemed to round out the string of paraffinic price adjustments that began in late November. Naphthenic base oil producers have lowered prices as well, driven by softer crude oil and feedstock prices, along with ebbing demand for base stocks and a need to lower inventories as the year draws to an end.

As the first order of base oils business in the New Year, Motiva intends to lower its Group II+ and Group III base oils by 30 cents per gallon on Jan. 1, 2024. Previously, on Dec. 1, Motiva had decreased its Group II 100N grade by 30 cents/gal and its 220N and 600N grades by 50 cents/gal.

Petro-Canada announced that the company would be decreasing its Group II+ 65 cut by 30 cents/gal, and all of its Group III grades by 30 cents/gal, with an effective date of Jan. 1 as well. On Dec. 8, the producer had lowered its Group II 70, 100 and 200 grades by 30 cents/gal, its Group II 300/350 and 600/650 base oils by 50 cents/gal, and its Group II+ 100 grade by 15 cents/gal. The Group II+ 65 and Group III cuts had not been adjusted at that time.

A majority of producers and rerefiners have lowered their posted prices since late November. Group I grades were adjusted down by 20 cents/gal and Group II grades by 15, 30, 35 and 50 cents/gal, with the heavier grades experiencing the larger decreases. Some Group II+ prices were down by 10, 15, 25 and 30 cents/gal. SK had marked down its Group III cuts by 15 cents/gal and now, after Motiva’s and Petro-Canada’s most recent announcements, Group III prices from these two suppliers were down by 30 cents/gal as well.

On the naphthenic base oils front, suppliers have adjusted prices down by 15 cents/gal and 20 cents/gal between Dec. 15 and Dec. 20, driven by similar fundamentals as on the paraffinic side, although most naphthenic producers reported balanced-to-tight supply and demand fundamentals, particularly as far as the light grades were concerned.

The tighter conditions were thought to stem from the fact that there had been planned and unplanned production shutdowns at naphthenic base oils facilities in recent weeks, along with healthy demand from the export segment.

Naphthenic base oil producer San Joaquin Refining completed a scheduled turnaround at its refinery in Bakersfield, California, in early December, but was forced to shut down the plant again due to technical issues in the newly installed equipment in the hydrotreater. The producer was expected to restart the unit last week, but it was not possible to confirm whether it had restarted due to staff being away during the holidays. SJR appeared to have exhausted the inventories built ahead of the turnaround and was likely to take some time to rebuild them, although the supplier was hoping to be able to fulfill its backlog of orders in early January. 

Market participants were keeping an anxious eye on developments in the Red Sea, where Houthi militants had attacked several commercial vessels, forcing shipping companies to reroute their ships and avoid passage through the Suez Canal. This situation was expected to lead to longer delivery times and increased freight rates.

In the case of base oils, buyers and suppliers worried that product shipped from the Middle East would be prevented from reaching the Americas. Indeed, it was heard that producer Abu Dhabi National Oil Co. had temporarily shut down its Group II and Group III base oils plant in Ruwais, United Arab Emirates, as demand had plummeted. A second Middle East supplier was heard to have not completed any shipments to the U.S. and Europe in December. The shipping disruptions have ostensibly exacerbated the already slow conditions observed in base oil segments, with fewer cargoes expected to be imported into the U.S. from the Middle East over the next few weeks. Asian products were anticipated to fill the gap left by Middle Eastern products, particularly as far as Group III base oils were concerned, although demand in general has been sluggish and shipments were encountering delays at the Panama Canal. Group III base oils were anticipated to tighten over the next few weeks due to all of these disruptions, and spot prices have steadied as a result.

Meanwhile, Group I and Group II availability was deemed more than adequate to cover the current call for product as plants were running at top rates, although some refiners have started to increase the production of fuels to avoid a large base oil overhang. Spot prices fell by a few cents to about 20 cents/gal, with the heavy-viscosity grades seeing heftier adjustments given more plentiful supplies.

U.S. producers continued to pursue export opportunities to Mexico, Brazil and India, although demand from the export front has also weakened as buyers preferred to end the year with minimum inventories to lower their tax exposure. Brazilian buying appetite remained healthy given difficulties for buyers to source domestic material as a local producer was still experiencing production issues, while a second plant had shut down unexpectedly. This keen interest seemed to apply to shipments of naphthenic base oils to Latin America as well, as an imminent plant turnaround in Brazil was likely to reduce availability.

The seasonal demand slowdown, together with sliding crude oil and feedstock values had exerted downward pressure on base oil prices throughout the last quarter of the year. However, crude oil futures strengthened this week, jumping by more than 2% on Tuesday as more attacks on vessels in the Red Sea stoked fears of increased shipping disruptions. There was also some optimism that potential interest rate cuts would encourage economic growth and fuel demand.

On Tuesday, Dec. 26, WTI February 2024 futures settled on the CME at $75.57/barrel, compared to $73.44/bbl for January 2024 on Dec. 19.

Brent futures for February 2024 delivery settled on the CME at $81.07/barrel on Dec. 26, from $79.23/bbl futures on Dec. 19.

Louisiana Light Sweet crude wholesale spot prices were hovering at $76.29/barrel on Dec. 22, from $75.36/bbl on Dec. 18, according to the Energy Information Administration. There was no trading on Dec. 25 due to the Christmas 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.

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