Availability of Group I base oils had been partly impacted by a brief shutdown at Paulsboro’s Group I facility in late May, along with a pick-up in demand both on the domestic front and from the export market. A tight scenario in Europe enticed spot cargoes away from the U.S. supply system, while increased buying interest from Mexico and West Coast South America also drew on supplies from the U.S. Buying interest from Brazil was steady to softer, with transactions having been hindered by steeper prices in the U.S., reduced spot availability, logistical issues and flooding in a key industrial region of Brazil.

The Group II segment also experienced some effects from a partial shutdown at Motiva’s Group II facility last month, which was heard to have only affected the low-viscosity grades. Steady domestic demand, coupled with export business have also led to snug market conditions, particularly of the light grades.

While supplies in the Group III segment were plentiful, the 6 centiStoke and 8 cSt grades have enjoyed improved buying interest, and spot prices have therefore stabilized and even inched up by a few cents per gallon. The U.S. continued to draw ample volumes from Asia and the Middle East given steady demand and attractive prices compared to other regions.

Meanwhile, re-refiners received an increased number of inquiries for additional volumes of Group II, Group II+ and Group III grades to fill some of the domestic supply gaps in May. A re-refiner commented that its plant was running at top levels to meet burgeoning requirements: “Even producing at record rates, we can barely keep up with orders,” the source noted. Participants also mentioned that there had been an increase in used oil collection rates, which points to the fact that lubricant consumption has been stronger. Despite the fact that base oil demand traditionally starts to taper off in June and July, suppliers said that they had not seen any signs of a slowdown yet.

Most base oil segments have also seen an uptick in requirements as participants build inventories to cover potential production disruptions during the Atlantic hurricane season, which was predicted to be busier than in the previous two years, with several severe storms and hurricanes forecast to hit the U.S. Gulf Coast between June 1 and Nov. 30, but most of the activity expected to occur in August and September.

Amidst the busy base oil market scenario, blenders have been dealing with a storm of their own in that they were facing difficulties in transferring recent base oil and additive price increases down the supply chain. Base oil producers introduced increases in March and April, and additive suppliers have announced price markups within a range of 8% to 10% for May implementation. Given plentiful finished products supplies, there continued to be competitive actions among suppliers, making it difficult for manufacturers to implement proposed price increases. In previous years, posted price increases for base oils and additive price initiatives almost immediately triggered lubricant price announcements, and these were typically implemented as planned. However, lubricant suppliers have been facing more resistance to the initiatives given less robust market fundamentals than in years past.

Several finished products manufacturers, including at least two majors, are seeking price increases to offset the higher cost of base oils, additives, packaging and transportation, with the initiatives calling for increases between 10% and 15% for May and June implementation. Some of the increases were being implemented, despite consumer resistance and ongoing competition among sellers. A number of suppliers continued to assess the rates of implementation before announcing markups of their own.

On the naphthenic base oils front, supply and demand fundamentals continued to be described as balanced-to-tight, supporting the current price structure.

The light-viscosity oils remained in high demand, which has incentivized refiners to run plants at full rates. While the heavier grades were more readily available, suppliers said they were seeking export opportunities to manage inventories at home. Buying appetite from Central and South America and Europe remained healthy.

Softer crude oil values compared to April levels, when naphthenic price increases went into effect, have started to exert pressure on pale oil prices. However, suppliers said that the lower crude oil values might need to be maintained for a certain amount of time before they would consider price adjustments, as market fundamentals were fairly robust.

Base oil market players on both the naphthenic and paraffinic sides kept a close eye on crude oil and feedstock prices, as West Texas Intermediate and Brent futures have lost significant territory over the week. Prices seemed fairly impervious to geopolitical upheavals but were depressed by the OPEC+ decision to phase out production curbs later in the year.

Crude oil futures have erased most gains for the year after falling over five consecutive sessions, with the July contract plummeting 3.6% on Monday following news of the OPEC+ decision to phase out 2.2 million barrels per day in production cuts, starting in October. Futures were also trading lower on Wednesday morning.

On Tuesday, June 4, West Texas Intermediate July 2024 futures settled at $73.25 per barrel, compared to $79.83/bbl on May 28. 

Brent futures for August 2024 delivery were trading on the ICE at $77.19/bbl on June 4, compared to $84.48/barrel for July futures on May 28. 

PLEASE NOTE: Petro-Canada decreased posted prices for its Group II 70N grade by 20 cents/gal on May 3. The company also decreased its postings of the Group II+ 65N by 15 cents/gal, its Group III 4 cSt grade by 50 cents/gal, and both its 6 cSt and 8 cSt by 30 cents/gal on May 10. The Price Table below has been updated to show the decreases. We apologize for the omission at the time of implementation.

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.