U.S. Base Oil Price Report


The U.S. base oils market was gearing up for increased activity as consumers have started to pad inventories for the spring lubricant production season and suppliers appeared prepared for heightened demand, although business has been less robust than at the same time in pre-pandemic years. A flurry of orders was brought about by posted price decreases in January, but the pace has cooled slightly since then.

Suppliers did not expect orders to improve substantially until the end of February or early March because buyers seemed concerned about downstream conditions and preferred to delay orders as long as possible, hoping for increased lubricant demand and further price decreases to emerge. These factors, together with firm diesel, vacuum gasoil and asphalt prices, has led to reduced run rates at a number of base oil plants and an increase in distillates and alternate refined products production. On the bright side, participants also expected a more intense driving season as pandemic-related conditions that had limited travel have waned, also leading to increased air travel and jet kerosene demand.

In the meantime, fundamentals in lubricants markets were still slightly undefined, as demand for finished lubricants has not been as strong as expected given that blenders have started to grant discounts and end-users preferred to wait to see if additional incentives would be offered. A number of major lubricant manufacturers have lowered values by up to 6% to 8%, while several independent blenders have decreased lubricant prices between 40 cents/gal and 55 cents/gal since the beginning of the year in order to remain competitive and protect existing accounts. Additive prices, however, remained firm, despite a marked improvement in product availability. The lukewarm buying trends seen in the different lubricant sectors translated into sluggish base oil consumption.

Increased buying appetite for API Group I grades has emerged in Mexico, and it was heard that there were also inquiries for Group I and Group II base oils from Brazil. Export prices for U.S. product were expected to have bottomed out and buyers’ inventories have also been depleted, with insufficient domestic production in those countries leading to heightened interest in U.S. imports. As supply has tightened in Asia, offers from that region have been less plentiful and buyers in Latin America also generally preferred to avoid long lead times.

Producers in the Group II segment might not be in a position to offer many export supplies as a key U.S. Gulf Coast Group II plant was undergoing a two-month turnaround and spot barrels of the heavy grades were expected to remain tight for some time. Buyers have also started to increase the volumes taken under contract, which could exacerbate the tightening conditions, particularly next month as a second large producer might be starting to build inventories ahead of a turnaround in the second quarter. The producer will be completing a catalyst change.

There were reports of some availability of light and mid-viscosity grades, which might attract bids from India, the Middle East and Europe, although prices were still difficult to work. In terms of imports to the U.S., about 4,000 metric tons of base oils were being discussed for shipment from Hong Kong to the U.S. Gulf in March. A 2,000-ton lot was also discussed for lifting in Cartagena, Colombia, to the U.S. Gulf in mid Feb. Additionally, approximately 4,000 tons of used oil were anticipated to be shipped from Baltimore, Maryland, to Kalundborg, Denmark, in early March.

Supply and demand conditions within the Group III segment were described as fairly balanced, as imports were meeting demand in the U.S. quite well. Some of the grades –specifically, the 6 centiStoke and 8 cSt – were heard to be more plentiful, given that requirements for these cuts were not as strong as for the 4 cSt. Some suppliers have therefore resorted to offering temporary value allowances or adjustments into select accounts to move more of these products.

On the naphthenic base oils front, prices were steady, following 20 cents/gal and 30 cents/gal decreases implemented in mid-January and a tightening of supplies as San Joaquin Refining started a maintenance shutdown to install a new vacuum distillation tower at its Bakersfield, California, refinery on Jan. 21. The company said that the turnaround was successfully completed on Feb. 12 and the unit was running well.

The January pale oil price decrease sparked a number of new orders, but demand was still lagging compared to previous years, sources said. However, suppliers expected second quarter demand to be robust. While demand for naphthenic base oils from Europe has started to pick up, Latin American buying interest was still subdued.

Upstream, crude oil futures slipped by more than 1% on Tuesday after the U.S. government said it would sell more crude from its Strategic Petroleum Reserve and data from the American Petroleum Institute reflected a large build in U.S. crude oil and distillate inventories. Ongoing inflation and the release of the U.S. consumer price index – which showed that consumer prices rose in the previous two months – also weighed on crude values. Additionally, crude exports resumed at a key Turkish port after a devastating earthquake last week.

On Feb. 14, WTI March futures settled on the CME at $79.06/barrel, compared to $77.14/bbl on Feb. 7.

Brent futures for April delivery settled on the CME at $85.58/barrel on Feb. 15, from $83.69/bbl on Feb. 7.

Louisiana Light Sweet crude wholesale spot prices were hovering at $83.94/barrel on Feb. 13, from $77.91/bbl on Feb. 6, according to the Energy Information Administration.

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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