U.S. Base Oil Price Report


In a fairly quiet market – with many players away attending the Argus Global Base Oils Conference in London – reports that ExxonMobil intended to increase postings started to circulate, surprising some participants, given that the market seemed to be well-supplied, demand was somewhat lethargic, and crude oil prices have not strengthened significantly.

“Seems odd, and uncharacteristic with what the industry is seeing in spot and export markets,” a source commented, adding that it would be interesting to see if additional activity emerged during the week. Another source said that the market “seemed so saturated that the announcement was shocking.” Other participants were less nonplussed, explaining that base oil margins have been thin, and ExxonMobil was likely hoping to improve them. Spot and export prices have been on a downtrend, and this initiative might help stem the fall. Vacuum gas oil prices have also been increasing, placing pressure on refined products.

Yet other participants conjectured that the increase was an individual move, “not a market move,” and that the producer might have been trying to discourage additional orders because it is short on product. ExxonMobil’s API Group II plant in Rotterdam, the Netherlands, is undergoing a turnaround until the end of April, and the producer has been shipping base stocks from its base oil units in Baytown, Texas, and Singapore to Europe to meet its requirements there, likely leaving the producer on the tight side sytem-wide.

According to sources, ExxonMobil was planning to inform customers on Wednesday that it was raising all of its base oil prices by 20 cents per gallon, with an effective date of Feb. 23.

Shortly after, Paulsboro communicated an increase on its API Group I postings of 20 cents/gal, effective Feb. 28. The Price Table below will be adjusted next week when the increases go into effect.

Some sources also pointed out that if West Texas Intermediate crude oil prices were to rise to above $80 per barrel and remained at that level for some time, other suppliers might consider price adjustments. However, despite ongoing conflicts in the Middle East and Eastern Europe, WTI futures lingered in the high $70s/bbl.

Crude oil futures edged lower on Tuesday but remained near three-week highs on heightened Middle East tensions and a few signs that the Chinese economy was recovering. China is the largest crude oil importer and a stronger economy means that the country was likely to import more oil. However, despite the ongoing Israel-Hamas war and continued Houthi attacks on vessels in the Red Sea,  prospects of reduced global oil demand on macroeconomic uncertainties placed downward pressure on pricing.

On Tuesday, Feb. 20, West Texas Intermediate (WTI) March 2024 futures settled on the CME at $78.18 per barrel, compared to $77.87/bbl on Feb. 13.

Brent futures for April 2024 delivery settled on the CME at $82.34/barrel on Feb. 13, from $82.77/bbl on Feb. 13.

Louisiana Light Sweet crude wholesale spot prices were hovering at $82.45/barrel on Feb. 16, from $79.99/bbl on Feb. 12, according to the Energy Information Administration. There was no trading on Feb. 19 due to the President’s Day holiday in the United States.

Lubricant manufacturers were likely to resist base oil price increases, sources conjectured, as demand for finished products has not picked up significantly yet, despite expectations that conditions would improve ahead of the spring season. Base oil buyers have, in fact, been requesting temporary value allowances or adjustments and special discounts as finished products demand remained lackluster and it was difficult to transfer current costs down the supply chain. Manufacturers have also been keeping leaner inventories given high interest rates affecting credit terms.

There has also been talk about additive producers hoping to lift prices, with one producer heard to have communicated a 4% to 5% increase on additives for March implementation. However, blenders were likely object to the initiatives.

U.S. base oil suppliers continued to pursue export opportunities to keep domestic inventories in check. Spot prices for Group I and Group II grades have slipped in recent weeks, as sellers hoped to encourage additional orders, but seemed to have stabilized as several cargoes have been lined up for export to Europe, India and the Middle East, including a 7,000 to 8,000-metric-ton cargo expected to be shipped from Houston, Texas, to West Coast India in the first half of March. A 10,000-ton lot was on the table for prompt shipment from the U.S. Gulf to Mumbai, India, and the United Arab Emirates. A second 10,000-ton parcel was also mentioned for possible shipment from the U.S. Gulf to West Coast India in the second half of March.

Offers of Asian base oils into the U.S. Gulf and Latin America have turned less competitive given rising freight costs. Even so, there were a couple of parcels concluded for shipment from South Korea to the West Coast of South America, with a 3,800-ton lot quoted for lifting in Ulsan and delivery in Callao, Peru, and Quintero, Chile, in late February to early March.

The Group III segment seemed to be partly insulated from the downward spot price adjustments as spot volumes were limited by the shipping difficulties that suppliers had encountered due to the Houthi attacks near the Suez Canal and the need for ships to go on longer routes. Recent delays in the Panama Canal had also made suppliers more cautious about assessing delivery dates for spot shipments, as they prioritized contract commitments.

Mexican base oil demand has started to pick up as well but was expected to be lower in terms of volumes than in previous years given more stringent import requirements imposed by the Mexican government, particularly for light grades used as diesel extenders. Nevertheless, minimal domestic production in Mexico and the proximity to U.S. production sites continued to support robust business. Several shipments were under discussion as lubricant manufacturers were looking to replenish stocks.

Recent production outages in Brazil had encouraged buyers to secure import cargoes, particularly from the U.S., but buying appetite has flagged because a key producer has increased output levels and appeared able to deliver all contract volumes. Lower domestic prices in Brazil were competing with U.S. offers. Participants hoped discussions would regain momentum following the Carnival holidays in Brazil last week.

On the naphthenic base oils side, supply and demand of light viscosity base oils was deemed balanced-to-tight, supporting prices, but the heavy-viscosity grades were exposed to downward pressure given sluggish offtake. Suppliers expected consumption from the tire, asphalt and rubber modifier segments to ramp up in March, drawing the heavy grades. Export business into Europe, Asia and Latin America were helping keep domestic naphthenic base oil inventories from building.

A recent turnaround at Calumet’s plant in Princeton, Louisiana, in late January, and an earlier maintenance program at San Joaquin Refining’s plant in Bakersfield, California, last December had also led to tighter conditions. A brief shutdown at a third producer’s facilities in mid Jan. due to extreme winter temperatures and a key producer’s scheduled maintenance in March were expected to further compress supplies.

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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