U.S. Base Oil Price Report


SK Enmove – formerly SK Lubricants Americas – communicated a posted price decrease for its API Group III base oils this week, with softer crude oil values and lengthening supply thought to be driving the initiative. Base oil demand showed an uptick as the lubricant spring production season gets underway, although activity was still somewhat subdued. Orders were expected to gain impetus as manufacturers build product inventories to cover increased consumption ahead of the summer driving season, which was expected to be stronger than in the previous three years.

Severe winter weather continued to threaten transportation and power supply in many parts of the United States.

SK reduced the posted price of its Group III base oils by 10 cents per gallon, effective March 1, but left the price of its Group II+ 70N grade unchanged. Late last year, Seoul-based SK Lubricants announced that it would change its name to SK Enmove, effective Dec. 1, 2022, to reflect the company’s sustainability efforts, but the name change for its Americas affiliate was approved only recently.

There were still many uncertainties plaguing the lubricants segment, and one of the factors that remained a question mark was pricing, as buyers continued to pressure suppliers for discounts on the heels of base oil price decreases in January and a fresh decrease announcement for Group III base oils this week.

At the same time, softer crude oil and feedstock prices were offering some relief to base oil producers. Base stock posted prices had been holding at steady levels since January as the supply and demand ratio had tightened in most sectors, and this supported the prevailing price structure.

A majority of the Group I cuts were on the tight side, particularly after some export shipments had been concluded to Europe and Africa, reducing some of the product overhang.

The Group II cuts were mostly balanced-to-tight against demand, as the Excel Paralubes Group II plant in Westlake, Louisiana, was expected to complete a two-month turnaround this month, and a second Group II producer was preparing inventories for a maintenance shutdown in the second quarter, taking barrels out of the spot supply system.

Even so, there were some pockets of the market that showed a slight lengthening, as was the case for the light-viscosity Group II cuts and the Group III 6 centiStoke and 8 cSt grades, and there were expectations of more excess oil becoming available this month. This was placing downward pressure on spot indications for these grades, prompting price drops of 10 cents per gallon to 20 cents/gal. A U.S. Gulf Coast Group II supplier was heard to have granted a substantial discount to gain market share. Group III suppliers have also implemented temporary value allowances or adjustments of up to 40 cents/gal to protect accounts.

There were reports that a couple of refining units at Motiva’s Group II and III refinery in Port Arthur, Texas, were unexpectedly shut down this week, but there appeared to be no impact on base oil production, according to sources familiar with the company’s operations.

Group III grades continued to be regularly imported from the Middle East and Asia to the United States, with volumes having increased steadily over the last couple of years as demand for these products skyrocketed. Most plants were running at top rates in those regions, allowing for plentiful supplies to reach the Americas. With improved availability of additives in the U.S. and other regions came expectations of heightened Group III base oils demand in the second quarter, as lubricant manufacturers ramp up production. Aside from regularly scheduled Group III shipments, it was heard that 7,700 metric tons of base oils were expected to be shipped from Sitra, Bahrain, to Houston, Texas, in the second half of March.

Competitive base oil pricing in Asia has also attracted business into South America, with a 5,000-ton cargo of four base oil grades on the table for lifting in Ulsan, South Korea, to Rio de Janeiro, Brazil, this month.

In terms of exports, a 3,500-ton cargo, possibly of Group III base oils, was mentioned for shipment from Houston to Antwerp, Belgium, at the end of March or early April. A 1,400-ton parcel was discussed for shipment from New Orleans, Louisiana, to Rio Haina, Dominican Republic, in March. Demand from Mexico has improved, with U.S. Group I supplies heard to be moving to the neighboring country at competitive prices, although demand for diesel blending remained lackluster due to ongoing subsidies.

In the naphthenic base oils camp, prices were reported as stable. There have not been any adjustments reported since the 20 cents/gal and 30 cents/gal decreases implemented in mid-January. Availability had become slightly strained, particularly of the light grades, given a turnaround at San Joaquin Refining’s naphthenic base oil plant in January and February, and healthy requirements against steady demand.

While domestic pale oil consumption remained at expected levels, there has been heightened buying interest from Europe and Latin America, with current availability levels expected to be sufficient to cover these requirements for the time being. Demand for most grades was anticipated to increase in the coming weeks, both domestically and on the international arena.

Meanwhile, lubricant prices continued to face downward pressure given demand uncertainties coupled with plentiful availability. Major lubricant manufacturers have acquiesced to decreases of up to 6% to 8%, while several independent blenders adjusted lubricant prices down between 40 cents/gal and 55 cents/gal during the first few weeks of the year. There were additional discounts granted on a case-by-case basis as well, according to sources. Demand from the automotive sector was characterized as slightly disappointing, but suppliers kept their hopes up that buying interest would flourish in coming weeks in response to seasonal activity.

In the additive segment, despite suppliers having dug in their heels at first and not granting any decreases, there were reports of some situations in which customers have been able to obtain discounts, but details remained unconfirmed.

Upstream, crude oil futures jumped by nearly 2% on Tuesday after sliding in previous sessions as optimistic prospects for economic growth in China and accompanying increased crude demand offset worries about further interest rate hikes in the U.S., which could hurt consumer demand.

On Feb. 28, WTI April futures settled on the CME at $77.05/barrel, compared to $76.16/bbl for March futures on Feb. 21.

Brent futures for April delivery settled on the CME at $83.89/barrel on Feb. 28, from $83.05/bbl on Feb. 21.

Louisiana Light Sweet crude wholesale spot prices were hovering at $78.57/barrel on Feb. 27, from $80.26/bbl on Feb. 17, according to the Energy Information Administration. There was no trading on Feb. 20 due to the President’s Day 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.

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.

Related Topics

Base Oil Pricing Report    Base Stocks    Market Topics    Other