HollyFrontier and Calumet were the two Group I producers who announced decreases during the week. HollyFrontier told customers it would lower the posted price of all of its Group I base oils by 20 cents per gallon, effective September 23.

Calumet announced a 20 cent/gal decrease on its Group I SN600 and bright stock grades, effective September 30.

Other Group I producers were heard to be monitoring market developments, but had not announced any price reductions by the publishing deadline. At least one of them was understood to have granted temporary value allowances on most of its base oil grades in the previous two months.

In early September, several Group II, Group II+ and Group III producers decreased postings, with Motiva, Chevron, Excel Paralubes, Calumet, ExxonMobil and Petro-Canada adjusting down Group II posted prices by 18 cents/gal, 20 cents/gal, 30 cents/gal, 40 cents/gal and 50 cents/gal – depending on the grade and the supplier – with the heavier grades generally showing the larger decreases.

Group II+ suppliers Motiva, ExxonMobil, SK Enmove, Petro-Canada and rerefiner Safety-Kleen lowered postings by 15 cents/gal, 20 cents/gal and 40 cents/gal, varying according to the grade. The Group III prices were reduced by 15 cents/gal and 25 cents/gal.

SK Enmove also implemented additional decreases on September 16, with posted prices of its Group II+ 70N grade moving down by 10 cents per gallon, and its Group III 4 cSt grade by 10 cents/gal, its 6 cSt grade by 5 cents/gal and its 8 cSt grade by 20 cents/gal. SK had previously decreased its Group III 4 cSt grade by 10 cents/gal and its Group III 8 cSt grade by 18 cents/gal on September 1.

Most participants agreed that the main reason for the downward adjustments had been a slump in demand and a lengthening of supplies, particularly of the Group II grades. Some suppliers agreed that demand had dipped, but this had not affected them significantly because consumption had been rather lackluster since the beginning of the year and they had adjusted their projections. Other suppliers said that the decreases had not necessarily spurred additional demand, but orders had not dropped either, adding that early October volumes “were looking good” and would hopefully remain steady throughout the month. 

Blenders were cautious about holding high inventories given current interest rates and lackluster demand from the finished lubricant segment, particularly the automotive industry. This situation had also led to competitive activity among lubricant manufacturers and downward pressure on lubricant prices.

As the summer driving season has come to an end and the most active period of the Atlantic hurricane season was nearing its denouement as well, suppliers have started to look for opportunities to place the additional inventories that they had kept in case of supply disruptions during the hurricane season, which officially runs from June 1 until November 31.

While hurricanes and major storm systems are unlikely to hit in October and November, this week, Tropical Cyclone System Nine was forming near the western tip of Cuba and was expected to develop into Hurricane Helene by Wednesday as it moved across the eastern Gulf of Mexico. The National Hurricane Center said that the storm could become a major hurricane when it reaches the northeastern Gulf Coast on Thursday, bringing the “risk of life-threatening storm surge and damaging hurricane-force winds.” A number of major oil companies operating in the region, including Chevron, Shell and Equinor said they had begun evacuating staff from offshore facilities, Reuters reported.

Base oil facilities located in Louisiana and Texas were also expected to implement some storm preparedness plans ahead of the severe weather system. At least one base oil plant was heard to be only now resuming full production after reducing operating rates ahead of Tropical Storm Francine, which made landfall on the Gulf Coast on September 12. Port and terminal operations at the Port of New Orleans had also been suspended temporarily at that time.

ExxonMobil’s Group I plant in Baton Rouge, Louisiana, was reported to have trimmed operating rates ahead of Hurricane Francine, but production was expected to have been ramped up last week, although this was not confirmed by the producer directly as the company does not comment on the status of its operations. Meanwhile, Calumet reported that the company’s naphthenic and paraffinic base oil plants, which are located in Princeton and Shreveport, Louisiana, had not been affected by Francine last week.  

U.S. supplies of Group II and Group III base oils were expected to be reduced in October as Chevron was heard to be planning a three-week turnaround at its base oils unit in Richmond, California. Chevron was also anticipated to take its Group II plant in Pascagoula, Mississippi, off-line for three weeks in the first quarter of 2025 to complete maintenance. However, a majority of other refiners were running plants at close to top rates, favoring the production of base oils versus competing fuels giving more attractive margins.

Naphthenics

On the naphthenic base oils front, producers have also reduced prices, even though supply and demand conditions appeared to be tighter than for paraffinic oils and suppliers were not under the same kind of pressure to stimulate orders. Nevertheless, most of the pressure to reduce prices came from the crude oil and feedstock side, while a number of accounts had already seen decreases because these contracts are tied to a diesel index and diesel prices had fallen.

Ergon, Process Oils and Calumet announced 20 cent/gal decreases to be implemented between September 16 and 19. San Joaquin Refining has so far not issued any general price decrease announcements as the producer continues to monitor market conditions and reports a balanced supply/demand position.

Exports

On the export front, paraffinic base oil prices have edged down by 3 cents/gal to 5 cents/gal, depending on the grade, on the back of falling posted prices. Most grades are available for export, with the exception perhaps of the heavy-viscosity Group I cuts, bright stock and Group II 100 neutral, which remained snug.

Buying interest from Brazil, Mexico, West Coast South America, India and Europe persisted, but transactions were dampened by the gap between bids and offers and high freight rates on the long-haul shipments. Many consumers were holding sufficient inventories in Mexico and Brazil and this allowed them to hold off on purchases in hopes of achieving lower prices as values were declining in the U.S.

At the same time, Middle Eastern and Asian spot base oil cargoes continued to make their way into the U.S., particularly those of Group III grades as most of the base oils in this category consumed within the U.S. are imported. A 7,800 tons of base oils were heard to have been shipped from Ulsan, South Korea, and Yokohama, Japan, to the U.S. Gulf in mid September. A 4,000-ton cargo was also mentioned for shipment from the Straits to the U.S. Gulf in October/November. A 3,000-ton lot was expected to be lifted in Antwerp for Houston on September 18-25.

Crude

Crude oil futures continued to show volatility, but prices have regained some of the lost territory since August. Futures jumped by about 2% to a three-week high on Tuesday on news of monetary stimulus in China – the world’s top crude importer – on expectations that this would spur crude demand, and concerns that an expanding conflict in the Middle East could affect regional supply. Oil markets retreated somewhat as it became more clear that Hurricane Helene would likely miss most offshore oil and natural gas producing regions as it veered towards Florida.

On Tuesday, September 24, WTI October 2024 futures settled on the Nymex at $71.56 per barrel, compared to $71.19/bbl on September 17, and had settled at $65.75/bbl on September 10.

Brent futures for November 2024 delivery were trading on the ICE at $75.06/bbl on September 24, compared to $73.70/bbl on September 17 and $69.56/bbl on September 10.

Louisiana Light Sweet crude wholesale spot prices were hovering at $72.83/bbl on September 23, from $72.80 on September 16 and $71.65/bbl on September 9, according to the U.S. Energy Information Administration.

Other News

OPIS-Petrochemwire reported that U.S. trucking activity saw a month-to-month gain in August as the truck tonnage index rose 2.2% from levels seen in July, citing data released by the American Trucking Association. ATA Chief Economist Bob Costello said August that tonnage levels were the highest since February 2023, but the monthly index still remains well below recent highs seen in the summer and fall of 2022.

ATA maintains that trucking is a barometer of U.S. economic activity, as it says trucks are responsible for 72.6% of tonnage carried by all modes of domestic freight transportation. The U.S. commercial vehicle lubricants market size was estimated at 461.73 million liters (approximately 122 million gallons) in 2024, and is expected to reach 471.41 million liters (approximately 124 million gallons) by 2026, growing at a CAGR of 1.04% in the 2024-2026 period, according to a market report by Mordor Intelligence.

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/

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