Downstream, lubricant manufacturers also commented that margins had been compressed by rising production costs, including a recent hike in API Group I, Group II and Group II+ posted prices implemented by a number of suppliers. As a result of early February initiatives, posted base oil prices for these grades were expected to move up by 15 cents per gallon and 25 cents/gal, depending on the grade and the producer, but there has been resistance to these initiatives. A number of suppliers have also received requests for temporary value allowances as consumers are not able to absorb the higher base oil costs. Lubricant manufacturers hoped to be able to introduce price increases for lubricants, greases and other finished products this month, although competition among suppliers persisted.

Aside from the higher base oil prices, blenders were also worried about the new tariffs imposed by the U.S. on raw materials and packaging imported from China, and hoped to be able to pass some of the higher costs down the supply chain. On Feb. 10, the U.S. president also expanded steel and aluminum tariffs of 25% to all countries, effective March 12, which might impact the price of parts and machinery used in refining operations and lubricant manufacturing.

Trump has also threatened to impose tariffs on goods imported from the European Union and has temporarily put on hold levies on Canadian and Mexican imports. Canada and Mexico are the top sources of U.S. crude imports, together accounting for around one-quarter of the oil processed by U.S. refiners, according to Reuters. The U.S. imported 3.8 million barrels per day from Canada and 457,000 bbl/day from Mexico in 2024, according to data from the U.S. Energy Information Administration. The potential tariffs on Canada and Mexico could limit the feedstock choices for U.S. refiners,​ forcing them to look for more expensive alternatives, market analysts said. Refiners in the Midwest, who rely heavily on Canadian crude delivered via pipeline, might face a reduction in run rates and challenging economics if tariffs are imposed​. Duties on Mexican crude imports could also deprive several U.S. Gulf Coast refiners of heavy grades that may be difficult to replace.

Potential levies could also impact the price of parts and vehicles manufactured in Mexico, among many other items. In the latest spate of announcements, the U.S. president said that he wants to impose higher tariffs on imported cars, at a rate of at least 25%, to incentivize auto companies to move production to America, and that a decision would be announced on April 2, according to media reports. Higher vehicle prices might lead to a slowdown in auto sales in the U.S., which could, in turn, impact fuel and lubricant consumption.

Adequate supply of base oils did not seem to be an issue as most grades were readily available, although the Group I cuts were balanced-to-tight because of a structural deficit of certain grades such as bright stock against steady domestic and export demand. Bright stock was seeing strained conditions and firm prices globally as several Group I plants have been decommissioned in recent years, but demand has not declined at the same rate of the capacity decreases. Conversely, softer pricing for light grades has encouraged some refiners to use these cuts for fuel blending.

The Group II base oils were deemed sufficient to meet current requirements, but spot supplies may experience some tightening on the back of planned turnarounds in the coming weeks. 

Chevron was expected to commence a three-week turnaround at its Pascagoula, Mississippi, Group II plant in March, but was anticipated to have started building inventories to cover contractual obligations during the outage. However, there may be less availability of spot supplies, according to sources. The producer does not disclose details about its plant operations.

Calumet was completing a two-week maintenance program at its Group I and Group II units in Shreveport, Louisiana, in the second half of February. The producer has assured customers that it plans to have ample inventory to cover orders during maintenance.

Group III prices have stabilized and were receiving support from a tightening supply and demand ratio in the U.S., particularly of the 6 cSt and 8 cSt grades. This was the result of lower imported volumes moving to the U.S. since the beginning of the year and domestic producers having trimmed Group III output. Potential tariffs on Canadian imports could have a direct impact on Group III products moving from that country into the U.S. Upcoming plant turnarounds in the Middle East and Asia might reduce spot availability from those regions, offering further support to pricing.

In South Korea, SK Enmove will be completing a partial turnaround at its Group III plant in Ulsan for two months, starting in May, but the shutdown was not expected to have a significant impact on supplies because of uninterrupted production on the facility’s other trains, company sources said.

In the Middle East, Bapco was heard to have scheduled a 45-day turnaround at its Group III facilities in Sitra, Bahrain, starting in March.

Export activity has been rather muted in the U.S. because of reduced availability of export volumes, expectations of domestic demand ramping up in March, and difficulties in making prices work.

Base oils demand from Mexico was steady as this country relies heavily on U.S. imports. While some buyers delayed purchases for as long as possible to gain a clearer vision of pricing trends and the effects of potential tariffs on imports, others have returned to the market to replenish stocks, particularly as some hoped to beat the imposition of tariffs if they went into effect in March. Participants said it was too early to ascertain the exact effect that a tariff war between the U.S. and Mexico would have on base oil shipments. Economic uncertainties were impacting lubricant demand in Mexico and this was partly dampening base oil buying interest as well.

There was also nascent appetite for U.S. cargoes from Brazil, although buyers there were also able to source material from local producers, which was not the case for most Mexican blenders. A fire and production disruption at Moove’s lubricant plant near Rio de Janeiro last week was expected to create some lubricant shortages, but other lubricant suppliers in the country were anticipated to meet the unfulfilled requirements. These suppliers were anticipated to require additional base oils. The Brazilian Carnival holidays starting at the end of the month were slightly limiting the number of transactions being concluded.

On the naphthenics base oils side, prices were stable, but some grades continued to be pressured by sliding crude oil values and a loose supply and demand balance. Most grades were expected to see an uptick in demand during the spring.

Naphthenic base oil producer San Joaquin Refining was expected to complete a scheduled annual maintenance program at its naphthenic base oil plant in Bakersfield, California, in late February. The program started on Jan. 31 and was expected to last up to three weeks. The producer was anticipated to continue meeting contractual obligations during the shutdown as it has built inventories for that purpose, but will not be offering spot supplies until it is able to rebuild stocks, according to sources.

Also this year, both of Ergon’s refineries – Ergon Refining Inc. in Vicksburg, Mississippi, which houses a naphthenic base oils plant, and Ergon West Virginia Inc. in Newell, West Virginia, with a Group I and Group II base oil unit, will undergo major turnarounds, according to company sources. Further details were not forthcoming by the publishing deadline.

Prices

Crude oil futures slipped by more than 2% on Wednesday after the U.S. president called Russian President Putin and Ukranian President Zelenskiy to discuss a potential end to the war in Ukraine. The war has supported oil prices on concerns about global supplies, Reuters reported.

On Feb. 18, West Texas Intermediate March 2025 futures settled on the Nymex at $71.85 per barrel, compared to $73.32/bbl on Feb. 11.

Brent futures for April 2025 delivery were trading on the ICE at $76.37/bbl on Feb. 18, from $76.42/bbl on Feb. 11.

Louisiana Light Sweet crude wholesale spot prices were hovering at $74.25/bbl on Feb. 14, from $75.98/bbl on Feb. 10, according to the U.S. Energy Information Administration. There was no trading on Feb. 17 due to the Presidents Day holiday in the US.

Low-sulfur diesel wholesale spot prices were at $2.49/gal at New York Harbor, $2.36/gal on the Gulf Coast and $2.51/gal in Los Angeles on Feb. 14, compared to $2.51/gal, $2.39/gal and $2.49/gal, respectively, on Feb. 10, according to the EIA.

Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com

Posted Paraffinic Base Oil Prices: February 12, 2025 (Prices are FOB basis, in USD/gallon and USD/metric ton).
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