Weekly U.S. Base Oil Price Report


Finished lubricant consumption showed an uptick in the days leading to the Independence Day holiday in the United States, as numerous drivers were expected to hit the road over the Fourth of July weekend.

Base oil demand was also up, resulting in a few suppliers having to release some of the barrels they were keeping as back-up for potential supply disruptions during the hurricane season. Indeed, some attention was focused on Hurricane Beryl – the earliest category 5 hurricane to form at this time of the year – which was moving towards Jamaica on Tuesday.

A tighter base oil supply and demand balance placed upward pressure on spot prices, particularly those of bright stock, API Group II grades and some Group III cuts.

Within the Group I category, bright stock continued to be in the limelight as supplies were limited in the U.S., while domestic demand, as well as an ongoing call for product from the export front, resulted in more limited spot availability and upward price pressure. Spot prices were heard to have inched up by about 5 cents per gallon from the previous week.

Aside from enjoying healthy domestic demand, limited bright stock supplies in Europe and Latin America led to a wave of product inquiries for export transactions, which sometimes went unfulfilled as supplies were tight and U.S. producers prioritized contract commitments.

There seemed to be robust demand for bright stock in most regions, while worldwide production of this cut has been reduced due to Group I plant rationalizations in recent years. ExxonMobil hopes to capitalize on the global need for additional bright stock production and will be launching a new Group II base oil with similar characteristics to bright stock – EHC 340 Max, according to a company official speaking at the ICIS Asian Base Oils and Lubricants Conference in Singapore last week. This cut is also a heavy-viscosity grade, but reportedly offers additional advantages and will start to be produced in Singapore in 2025.

The Group II segment also experienced a sudden tightening of supply given recent efforts by both consumers and suppliers to pad inventories to avoid potential product shortages during the hurricane season along the U.S. Gulf Coast, where several Group II base oil plants are located. In years past, severe weather and flooding caused production outages and a scarcity of many base oil grades. While consumers have diversified their sources of raw materials, most of the base oils consumed in the U.S. are still manufactured along the U.S. Gulf Coast, which is exposed to violent storms in the June-September time frame.

These inventory building efforts, combined with recent and ongoing plant turnarounds, have created generally tight conditions for the Group II grades. The Excel Paralubes Group II plant in Lake Charles, Louisiana, was reported to have been taken off-line for maintenance in mid-June and was not expected to resume production until the first few days of July. Sources said the turnaround had reduced spot and export availability of Group II grades, but the producer was able to continue meeting contractual obligations. The turnaround came on the back of already tight conditions in the Group II segment, as a recent brief turnaround at the Motiva Group II plant in Port Arthur, Texas, together with healthy demand, had strained supply levels last month.

Within the Group III segment, availability of the 6 and 8 centistoke grades has tightened as well, given the delay of an import shipment, coupled with steady demand. There were reports that a supplier’s imports of Group III base stocks had suffered a setback due to a vessel delay, particularly affecting the 6 and 8 cSt grades. The supplier was heard to have notified a number of customers that it would not be able to deliver some July volumes, but this could not be confirmed. Other sellers appeared to be able to offer adequate supplies of most grades.

The 4 cSt grade appeared more accessible as domestic production of this cut was plentiful and there were imports available as well. The tighter conditions of Group III 6 and 8 cSt grades have placed upward pressure on spot prices, with values moving up by a few cents per gallon week on week.

Suppliers reported robust buying interest from Europe, the West Coast of South America and Brazil. European demand has picked up over the past few weeks, but was likely to wane once the summer holiday period starts in late July or early August. In Latin America, there have been attractive offers of Asian product competing with U.S. exports, and in some cases these cargoes were a welcome alternative as U.S. offers were limited in number.

A Brazilian base oil producer has lifted its domestic prices, which also made offers of U.S. products slightly more competitive, despite recent increases due to higher spot prices at origin and increased freight rates.

On the naphthenic base oils front, the light grades were still characterized as snug against current demand, especially coming from the transformer oil and adhesives segments. Refiners have been running plants at top rates and heavy-viscosity oils, which have seen weaker demand than their lighter counterparts, have lengthened. However, buoyant buying interest from Europe, Asia and Latin America helped keep the domestic market in balance.

A naphthenic base oil producer was heard to be building inventories, following an unexpected brief shutdown in the first part of June. There were no other production outages reported during the week.

Both paraffinic and naphthenic market participants were monitoring crude oil values because they have been on an upward trend for the past few weeks, after tumbling to yearly lows in late May. Base oil margins were still advantageous compared to those of competing fuels, and production rates were therefore expected to remain high for the time being.

Early in the week, crude oil futures climbed on fears Hurricane Beryl might impact offshore oil production areas in the northern Gulf of Mexico as U.S. demand for motor fuels was expected to increase. However, futures slipped on Tuesday as concerns about supply disruptions eased during the day.

A more-significant-than-expected U.S. crude oil inventory draw limited the downward movement. Inventories fell by 9.163 million barrels for the week ending June 28, according to The American Petroleum Institute, after analysts had expected a 150,000 barrel draw, OilPrice.com reported. U.S. drivers could also see the lowest Independence Day gasoline prices since 2021, with the national average price of gasoline was expected to hit $3.49 per gallon on July 4.

On July 2, West Texas Intermediate August 2024 futures settled on the Nymex at $82.81 per barrel, compared to $80.83/bbl on June 25.

Brent futures for September 2024 delivery were trading on the ICE at $86.56/bbl on July 2, compared to $84.99/bbl for August futures on June 25.

Louisiana Light Sweet crude wholesale spot prices were hovering at $87.60/barrel on July 1, according to the Energy Information Administration. Last week’s settlements were not available due to technical issues affecting the EIA’s website.

Downstream, independent lubricant manufacturers reported ongoing competitive movements by major producers, which partly undermined efforts to increase finished products prices and offset the base oil posted price increases implemented back in March and April. Some suppliers have seen the need to reduce prices to protect market share, while others have delayed the implementation of their intended increases because demand has been spotty, with some applications seeing brisk activity and others rather lackluster conditions. Still, a few blenders have been able to either maintain or slightly increase lubricant prices, depending on the segment they supply.

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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