Paulsboro also communicated an increase of 20 cents/gal for its Group I base oils, effective Feb. 28, to reflect recent market changes. The Price Table below will be adjusted this week to show Paulsboro’s revised postings.

Given that downstream fundamentals have not been particularly robust and base oil demand has remained below expected levels, it was heard that a few buyers had requested temporary value allowances or adjustments, and that at least one of the producers had advised select accounts of a TVA equal to the amount of the increase, with the said TVA to be reviewed in 30 days, but this information could not be confirmed. Other sources noted that suppliers were still offering discounts over contract pricing into a number of accounts.

Buyers had been surprised that producers would be increasing prices as base oil supplies seemed plentiful and although crude oil prices have moved up in recent weeks from levels seen earlier in the year, they have not registered massive spikes. There were rumblings that ExxonMobil was trying to discourage additional orders by increasing base oil prices because its supplies had tightened due to a two-month turnaround at the company’s Rotterdam, Netherlands, Group II plant. The producer had ostensibly shipped products from the United States and Singapore to meet requirements in Europe and had very little extra material in its system. Buyers said that they were unable to receive additional volumes of certain light-viscosity grades beyond those specified in contracts until June.

Downstream, conditions were described as fairly disappointing for most independent lubricant manufacturers, because demand for finished products remained sluggish and there has been fierce price competition to protect or regain market share. Some participants said that they had adjusted finished product prices down in order to retain accounts, but this meant production costs were barely covered.

Looking at upstream fundamentals, participants commented that West Texas Intermediate crude oil prices would have to linger above $80 per barrel for an extended period for other base oil suppliers to start contemplating price adjustments. Despite expectations that oil prices would firm due to the ongoing conflicts in the Middle East and Eastern Europe, WTI futures continued to hover in the high $70s per barrel. Diesel prices were expected to move up and this might encourage refiners to produce more fuels and less base oil, leading to reduced availability. Reuters reported that a slump in U.S. refining activity and disruptions to global trade had tightened diesel supplies in recent weeks, also dampening historically high U.S. diesel exports to Europe in February.

Crude oil futures jumped by more than $1 per barrel on Tuesday on indications that OPEC+ was considering an extension of its voluntary oil output cuts into the second quarter to support prices. In November, OPEC+ had agreed to curb output by about 2.2 million barrels per day for the first quarter of the year, led by Saudi Arabia rolling over its own voluntary cut.

The higher oil prices were also driven by escalating Houthi attacks in the Red Sea, which have resulted in increased freight rates and shipping times. A Houthi spokesperson said that the group’s operations in the Red Sea would stop only when Israeli “aggression” against Gaza ends, Reuters reported. Israel and Hamas, as well as Qatari mediators, all seemed cautious about progress towards a truce in Gaza, even after U.S. President Joe Biden said he believed a ceasefire could be reached in under a week to halt the war for Ramadan.

On Tuesday, Feb. 27, West Texas Intermediate April 2024 futures settled on the CME at $78.87 per barrel, compared to $78.18/bbl for March futures on Feb. 20.

Brent futures for April 2024 delivery settled on the CME at $83.65/barrel on Feb. 27, from $82.34/bbl on Feb. 20.

Louisiana Light Sweet crude wholesale spot prices were hovering at $80.93/barrel on Feb. 26, from $82.45/bbl on Feb. 16, according to the Energy Information Administration (EIA). There was no trading on Feb. 19 due to the President’s Day holiday in the United States.

Meanwhile, domestic base oil business was described as steady, with one source commenting “demand is a straight line instead of moving up,” although a number of suppliers have seen a pick-up in requirements compared to the fourth quarter of 2023. “Our business has been stronger than I expected in the first two months of 2024. Some of that may be rebuilding of inventories that were minimized at year’s end or a build-up for spring retail promotions,” a source noted. 

U.S. suppliers continued to eye export opportunities, with recent transactions involving shipments to India, the Middle East and Europe, and some cargoes moving to Mexico, Brazil and other destinations in Latin America. Sellers had adjusted offers down earlier in the month to capture business, but spot export prices were heard to have stabilized, although they remained far below domestic prices. A 7,000-metric ton cargo was discussed for prompt shipment from Paulsboro, New Jersey, to Gebze, Turkey, and Agioi Theodoroi, Greece, and a second 4,000-ton to 5,000-ton lot was on the table for prompt or early-March shipment from Paulsboro to Apapa, Nigeria. A 4,000-ton parcel was also lined up for prompt shipment from Pascagoula, Mississippi, to Singapore.

Prices for Group III grades were stable because spot volumes had been impacted by the shipping disruptions in the Panama Canal and the Suez Canal, which had either delayed deliveries, or had resulted in rising freight rates and difficulties in securing vessels as many were tied up for longer periods when they were forced to take longer routes. At the same time, reports circulated that some domestic producers who can switch from Group II output to Group III grades have done so because Group II supplies were ample and prices were under pressure. This adjustment had contributed to a Group III supply overhang and competitive offers from some sellers.

While Mexican base oil demand was expected to fall short of levels seen in the previous two years because stricter import license requirements imposed by the Mexican government prevented the light grades from being imported as diesel extenders, there has been increased buying interest from Mexican consumers. Several shipments were being discussed as lubricant consumption was expected to start to pick up and current inventories in Mexico were deemed generally low.

On the naphthenic base oils side, supply and demand of light viscosity base oils continued to be described as balanced-to-tight and prices were stable, but the heavy-viscosity grades were exposed to downward pressure because consumption has been less robust than for the lighter grades. However, suppliers remained optimistic that offtake from the tire, asphalt and rubber modifier segments would improve in March. Export shipments into Europe, Asia and Latin America were also helping keep domestic inventories under control.

A late January turnaround at Calumet’s plant in Princeton, Louisiana, and a maintenance program at San Joaquin Refining’s plant in Bakersfield, California, last December had also reduced supplies. A brief shutdown at a third producer’s facilities in mid January due to extreme winter temperatures and a key producer’s scheduled maintenance in March were expected to tighten pale oil availability.

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.