Weekly U.S. Base Oil Price Report


A tightening supply and demand scenario and firm crude oil and feedstock prices drove base oil producers to seek posted price increases over the last two weeks, with an additional supplier expected to implement markups this week, but also a decrease on one of its grades.

Although the initiatives were anticipated to face headwinds from blenders that argued that they would not be able to transfer the increases down the supply chain, most of the increases were expected to be pushed through.

Excel Paralubes informed customers that the company would be increasing its API Group II 110 neutral, 220N and 600N grades by 10 cents per gallon, but would decrease its 70N by 15 cents/gal, effective April 1. Sources commented that the decrease was likely to bring the 70N price more in line with current export prices. The company was heard to routinely move product to destinations such as India and Mexico. The Price Table below has been revised to show the adjustments.

Other producers had stepped out with initiatives that lifted Group I postings by 20 cents per gallon, Group II prices by 15 cents/gal, Group II+ by 15 cents/gal to 20 cents/gal, and Group III values by 10 cents/gal to 15 cents/gal, depending on the grade and the producer, between March 15 and March 22. One U.S. producer and a South Korean supplier had not initiated any posted price adjustments at the time of writing.

ExxonMobil and Paulsboro had communicated markups in February, but their initiatives were expected to be implemented in March as the producers had granted temporary value allowances at the time of the announcements, and there appeared to be more support for the increases as additional suppliers were seeking price hikes in March and April. There were no reports of TVAs being allowed for the most recent price increases.

Lubricant blenders and finished products manufacturers had been expected to resist the base oil price increases because of lackluster downstream demand and competitive activity among suppliers, which had in many cases resulted in sellers lowering prices to protect market share or capture new business. However, given the increased cost of base oils after the implementation of the latest posted price initiatives, lubricant manufacturers contemplated raising finished product prices to be able to recoup the base oil increases. No definitive increases were mentioned during the week, however, and many blenders were waiting to see if other manufacturers ventured out with announcements before making a decision.

In the naphthenic base oils camp, prices were also exposed to upward pressure due to steep crude oil and feedstock prices and a snug supply and demand balance, especially of the light grades used for transformer oils and metalworking fluids.

Supply had also been slightly impacted by a turnaround at Cross Oil’s naphthenic base oil plant in Smackover, Arkansas, that started in early March and was completed last week. The plant was back up and running at normal rates, according to a company source. This would likely allow additional pale oil volumes to enter the supply system in the coming weeks.

Market participants said that they were keeping a close eye on oil prices and would likely consider a base oil price adjustment if futures continued to hover at the current levels for an extended period.

Crude oil and vacuum gas oil prices have climbed since December and continued to trade at multiple-months highs on expectations of healthy crude oil demand, ongoing output curbs by OPEC+ members, and escalating geopolitical tensions in the Middle East. “A combination of rising geopolitical risk and supply disruptions has pushed oil prices higher, with Brent looking increasingly likely to break the $90/bbl mark,” OilPrice.com reported.

Crude oil futures surged on Monday, with U.S. futures closing at a five-month high on reports that the Iranian consulate in Damascus, Syria, had been hit by an Israeli missile strike. Expectations that economic growth in the U.S. and China would translate into increased oil demand and Ukranian attacks on Russian refineries also boosted prices.

On Tuesday, April 2, WTI May 2024 futures settled on the CME at $85.15 per barrel, compared to $81.62/bbl on March 26.

Brent futures for June 2024 delivery settled on the CME at $88.92/barrel on April 2, from $86.25/bbl for May futures on March 26.

Louisiana Light Sweet crude wholesale spot prices were hovering at $88.04/barrel on April 1, from $86.26/bbl on March 25, according to the Energy Information Administration.

Not only were posted base oil prices marked up, but export prices have also climbed by about 5 cents/gal to 7 cents/gal week on week as suppliers had been able to conclude transactions in the previous weeks and had lowered their inventory levels, while domestic demand has ramped up during the spring production cycle ahead of the summer driving season. Even though export activity has been less buoyant than in February and early March because many suppliers felt less pressure to find a home for their cargoes, there were several potential export transactions being discussed, with cargoes expected to be shipped to India, South Africa and the West Coast of South America.

A 2,000-metric ton cargo was mentioned for shipment from the U.S. Gulf to Durban, South Africa, in late April. A 6,000-ton cargo was possibly earmarked for shipment from the U.S. Gulf to the West Coast of India in late April. A 2,000-ton parcel was also expected to be shipped from Houston, Texas, to Guayaquil, Ecuador, in the second half of April. A 5,000-ton lot was heard to have been booked for shipment from Port Arthur, Texas, to Yanbu, Saudi Arabia, at the end of March, but was likely to be an intra-company movement. A 6,000-ton cargo was also expected to have been lifted in Pascagoula, Mississippi, for Jorf Lasfar, Morocco, in the second half of March, while a 3,000-ton parcel of bright stock was also ostensibly shipped from the U.S. Gulf to Agio, Greece, in late March.

Buying appetite from some destinations such as Brazil has ebbed slightly. Buyers in Brazil appeared to be satisfied with covering requirements through domestic base oils, especially as the main producer has adjusted prices down, but this could change as demand was anticipated to increase in May on seasonal factors.

Mexican buyers continued to show interest in U.S. base oil cargoes, and although volumes of the light grades flowing to Mexico have generally diminished due to stricter import rules, there were still large quantities of Group I and Group II base stocks moving to the neighboring country, particularly as activity in the automotive and industrial segments has picked up.

Additionally, Group III supplies in the U.S. were deemed balanced against current demand but were anticipated to become more plentiful once a South Korean producer completes a turnaround and more Middle East cargoes arrive in the Americas over the next couple of months. Spot prices were therefore exposed to downward pressure.

SK Enmove’s Group III facilities in South Korea have been shut down for routine maintenance from mid-March until mid-April, and this was expected to tighten short-term inventory, although the producer was expected to meet contract commitments as it had built inventories ahead of the turnaround and its plants in other countries were also running well. Another South Korean Group III producer, S-Oil, has scheduled a turnaround at its Onsan plant in September and October.

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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