Holly Frontier announced that the company would be increasing all of its Group I base oils by 20 cents/gal, with an effective date of March 20.

Petro-Canada will also be making posting adjustments, effective March 20. The producer’s Group II grades will increase by 15 cents/gal; its Group II+ 65N will move up by 15 cents/gal; its Group II+ 100N by 20 cents/gal; and its Group III base oils by 15 cents/gal.

Calumet also communicated a posted price increase of 20 cents/gal for its Group I base oils and 15 cents/gal for its Group II grades, effective March 22.

Rerefiners announced posted price increases as well. Safety-Kleen increased the posted price of its Group II+ RHT120 base oil by 15 cents/gal and its RHT240 by 20 cents/gal as of March 18.

Avista Refining and Trading informed customers that the company would be raising the price of its Group II+ grade by 15 cents/gal and its Group III cut by 10 cents/gal, effective March 22 “due to shifting market fundamentals,” the company explained.

The posted price increases were understood to be driven by climbing crude oil and vacuum gas oil prices, while a source noted that “switching from winter fuel to summer fuel raises costs as well.” A moderate increase in base oil requirements was also said to be behind the initiative, likely triggered by dwindling inventories and the need to rebuild stocks ahead of the spring production cycle. “While March looks fairly strong, most of the demand has been from additive companies that had to ensure they have enough inventory for the spring uptick,” a source said, while others seemed to agree that there has been a definite improvement in terms of buying activity, but levels were still not as strong as in previous years, with the exception of 2023, which actually saw demand fall to record lows.

Even so, buyers were expected to resist the base oil price increases given lingering uncertainties in terms of short-term lubricant and finished products demand, and the fact that competition among suppliers was eroding margins and would make it difficult to offset the fresh posted price increases.

ExxonMobil had communicated a price increase of 20 cents/gal on its Group I and Group II base oils in late February, and Paulsboro had also announced a 20 cents/gal increase on its Group I grades, but the announcements had met with buyer resistance as blenders maintained that market conditions were not supportive of the initiatives, given that downstream demand was lukewarm and lubricant prices were under pressure due to competition. At the time of the announcements, other suppliers had commented that the increases were necessary, but slightly premature. The two producers were heard to have generally granted temporary voluntary allowances to be reviewed in 30 days, or had delayed implementation, and were therefore expected to revisit the hikes this month, along with the other producers’ initiatives. The Posted Price Table had been revised to reflect these increases when they were first announced in late February.

Crude oil and vacuum gas oil values have been on an upward trend since December and were trading at their highest since October on expectations of reduced crude exports from Iraq and Saudi Arabia and signs of stronger economic growth in China and the U.S., which could potentially result in higher crude demand. Ukrainian attacks on Russian energy infrastructure have idled around 7% of refining capacity in the first quarter, a Reuters analysis showed. Market participants said refinery outages will push Russia to increase oil exports through its western ports in March by almost 200,000 barrels per day to around 2.15 million b/d. Despite international sanctions, Russia continues to export large quantities of oil to India, China and other countries. A drop in U.S. crude stocks last week also boosted prices.

On Tuesday, March 19, WTI April 2024 futures settled on the CME at $83.47 per barrel, compared to $77.56/bbl on March 12.

Brent futures for May 2024 delivery settled on the CME at $87.38/barrel on March 19, from $81.92/bbl on March 12.

Louisiana Light Sweet crude wholesale spot prices were hovering at $86.58/barrel on March 18, from $81.62/bbl on March 11, according to the Energy Information Administration.

While Group I supplies were deemed generally tight in the U.S., Group II availability was outpacing domestic demand and suppliers were therefore eager to locate export opportunities. Bright stock domestic spot prices have moved up by 4-5 cents/gal because of the difficulty in finding sizeable cargoes.

Buying interest from Brazil was mounting despite increased domestic production, following several months of local refineries suffering a litany of production issues. However, U.S. products were competing with Asian offers, which have been lowered in order to attract buyers. A 3,500-metric ton cargo made up of two grades was expected to be shipped from Onsan, South Korea, to Rio de Janeiro in early to mid-April, and other cargoes were being discussed. Nevertheless, the price of U.S. products shipped to the West Coast of South America were considered more attractive than South Korean offers.

Mexican appetite for U.S. base oils appeared to be growing gradually, with several Group I and Group II parcels being negotiated for shipment to the neighboring country. According to sources, new manufacturing plants established in the northern part of Mexico and higher employment rates were not only driving industrial oil demand up, but gasoline and motor oil consumption as well. However, buyers were seeking much lower prices than those offered by U.S. suppliers, and some negotiations were at a standoff.

There were also expectations that demand for imported base oils would show an uptick in Europe following the permanent closure of Eni’s Group I plant in Livorno, Italy. This week, it was heard that a 2,000-ton cargo was being discussed for shipment from Mississauga, Canada, to Antwerp, Belgium, in the second half of April.

Group III supplies were considered adequate to long to cover the current call for product in the Americas, with cargoes moving regularly from Asia and the Middle East to meet local demand. As availability has started to lengthen, the gap between products with approvals and those without appeared to be widening again, as additional cargoes came to the market.

SK Enmove – which regularly ships Group III grades to the Americas – was heard to have begun a turnaround at its Group III plant in South Korea on March 13 and was expected to complete it by the end of April. According to sources, the supplier will be able to meet requirements as it has built stocks and has continuous production at other sites, but the shutdown was expected to put a dent on spot availability.

On the naphthenic base oils front, there was increased talk about prices being exposed to upward pressure due to the steeper crude oil and feedstock prices. There was also upward momentum supported by a tightening supply and demand balance, particularly for the light grades. Steady interest to move shipments to Europe and Latin America helped keep domestic inventories from building as well. Suppliers said that they were monitoring crude oil prices and would likely consider a base oil price adjustment if Brent futures stayed above $85/bbl through the end of March.

Cross Oil was heard to have scheduled a three-week turnaround at its naphthenic base oil plant in Smackover, Arkansas, this month, which comes on the back of recent maintenance programs at two other facilities and a brief shutdown at the producer’s unit in mid-January due to freezing winter temperatures. The turnaround was expected to keep supply on the tight side until the unit was restarted and the producer was able to rebuild inventories.

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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