SK Enmove informed its customers that the company would be lowering its posted prices retroactively, with an effective date of May 1. The postings of SK’s Group II+ 70N grade will be reduced by 15 cents per gallon; its Group III 4 centiStoke grade will be decreased by 20 cents/gal; its 6 cSt by 10 cents/gal and its 8 cSt by 50 cents/gal.

Last week, Motiva announced that it would be reducing its two Group II+ postings by 15 cents per gallon, while the company’s Group III 4 cSt was decreased by 50 cents/gal, and its 6 cSt and 8 cSt grades by 30 cents/gal as of May 1.

SK recently completed a turnaround at its Group III plant in South Korea, which had started in mid March. The producer continued to meet its contractual obligations during the outage, but short-term inventory had been tight. The resumption of output was expected to result in additional spot cargoes becoming available, and this may coincide with a slowdown of activity in Asia, which would free up additional volumes for export. SK Enmove also plans to shut down its plant in Dumai, Indonesia, for a month-long turnaround this month, while a maintenance program will also be undertaken at the company’s plant in Cartagena, Spain, during the second half of the year.

There has also been an uptick in domestic production of Group III grades, because some Group II refiners preferred to increase Group III base oils output versus that of Group II grades as margins had so far been more attractive.

In contrast with the emergence of these decreases, most Group I and Group II suppliers raised prices in early to mid April, with the initiatives lifting Group I, Group II and Group II+ prices by 20, 30, 35 and 40 cents per gallon – depending on the grade and the supplier – between April 11 and April 19. Petro-Canada had also raised its Group II+ 100N grade by 35 cents/gal on April 12, but the company’s 65N grade remained unchanged.

The April increase initiatives came on the heels of a previous round of increases that was implemented during March 15 to April 1. The adjustments were prompted by steeper crude oil and feedstock prices and improving demand ahead of the summer driving season, which unofficially starts on Memorial Day on May 27 in the United States. Despite initial buyer resistance to the increases and producers granting some temporary value allowances, it appears that the initiatives have been implemented.

On the naphthenic base oils front, similar fundamentals to those observed on the paraffinic side drove producers Calumet, Ergon, Process Oils – an affiliate of Ergon that markets Cross Oil products – and San Joaquin Refining to raise naphthenic base oil prices by 30 cents/gal and 35 cents/gal, between April 15 and April 22. A snug supply and demand balance supported the increases, despite crude oil price fluctuations, with the light grades enjoying healthy demand and interest for the heavy-viscosity grades from the industrial, rubber and tire segments seeing an improvement ahead of the summer driving season as well.

While crude oil prices have surged compared to earlier in the year – boosted by the ongoing Israel-Hamas conflict and the Russian war on Ukraine, together with production curbs by OPEC+ members – futures have lost some territory over the last couple of weeks as there were growing hopes of a ceasefire deal between Hamas and Israel, easing concerns that the war in Gaza could spread to other countries in the Middle East and lead to crude supply interruptions.

Oil futures ended largely unchanged on Monday as a ceasefire agreement between Israel and Hamas had not been reached by the end of the day. Futures slipped on Tuesday on easing supply concerns, with data from the American Petroleum Institute showing a jump in U.S. crude and fuel stocks last week—a sign that demand has been weaker than expected. U.S. gasoline futures and ultra-low sulfur diesel futures were also trading lower.

On Tuesday, May 7, West Texas Intermediate (WTI) June 2024 futures settled on the Nymex at $78.38 per barrel, compared to $81.93/bbl on April 30. 

Brent futures for July 2024 delivery were trading on the ICE at $82.92 on May 7, compared to $87.86/barrel on April 30. 

Louisiana Light Sweet crude wholesale spot prices were hovering at $82.90/barrel on May 6, from $87.56/bbl on April 29, according to the Energy Information Administration (EIA).

On the base oil export front, Group I and Group II spot prices remained exposed to upward pressure despite falling crude oil prices due to dwindling supplies – particularly of the Group II light grades – and ongoing buying interest from Mexico, Brazil, other countries in South America, and India. A partial shutdown and maintenance at a Group II plant and a brief turnaround at a Group I unit in the U.S. this month have tightened supply in these segments as well. In contrast, Group III spot prices were under downward pressure given plentiful domestic supplies and the ample availability of imports from Asia and the Middle East.

Mexican buyers continued to look for U.S. Group I and Group II base oil cargoes. Offer levels have climbed given posted price increases in the U.S. and recent hikes in crude oil pricing, but there were still a number of cargoes waiting at the U.S.-Mexico border, which buyers speculated might become available at lower price levels.

Buying appetite for U.S. imports in Brazil has ramped up as buyers have used existing inventories and demand has started to improve, supporting higher U.S. spot export price indications. While a key Brazilian producer was set to increase prices after lowering them every month since the beginning of the year, some buyers still preferred to rely on local production rather than deal with the logistics of imports. However, participants said that securing vessel space had become less cumbersome than earlier in the year.

In downstream markets, despite an uptick in base oil demand in April ahead of the summer driving season this year, suppliers agreed that lubricant consumption had not reached the levels seen in 2021 and 2022. Last year, lubricant consumption hovered at record lows, and consequently, base oil demand had not been stellar either, sources acknowledged. This year, there are more positive signs about lubricant demand and suppliers have seen an inventory drawdown over the last few weeks, but there was still room for improvement, they explained. Additionally, a certain degree of uncertainty clouded prospects as some participants expected demand to decline in the fall and lead to a supply overhang. Blenders preferred to keep lean inventories and avoid price risks.

Lubricant and finished product manufacturers were also pressured by thinning margins and increased costs as base oil and additive prices have moved up. Some lubricant suppliers had actually lowered prices in April due to “competitive forces and slow sales.”

Additive suppliers have announced price increases in the realm of 8% to 10% for May implementation. A number of blenders were hoping to raise finished product prices in May to offset the steeper raw material costs, while others have been resisting the base oil and additive price increases and have tried to attain TVAs. Sources said that some buyers have only accepted a partial base oil price increase. With crude oil prices having dropped since the April base oil posted price increase announcements, participants wondered whether the initiatives would stick.

Back in April, manufacturer and distributor of bulk and packaged lubricants Highline Warren communicated a markup of up to 10% on finished lubricants, effective May 16, and Pinnacle Oil has now also announced an increase on all bulk and packaged products prices of up to 12%, with an effective date of May 29. Major lubricant manufacturers have started to join those independent suppliers who had originally nominated price increases, and this seemed to further support the initiatives. ExxonMobil was reported to have communicated a finished lubricant price increase of up to 15%, with an effective date of May 22. However, participants said that some of these announcements lacked details and were likely to face resistance.

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.