The hurricane left a path of destruction in Florida, South Carolina, Georgia, North Carolina, Virginia and Tennessee, with economic losses estimated at U.S.$160 billion. A rerefiner that operates a plant in Georgia said that operations had not been disrupted by Helene and surprisingly, there had not been any power outage. In fact, the rerefiner noted that the plant had completed one of the best weeks in terms of production since its inception. The only issue that may impact operations in the coming days was the difficulty in collecting used oil in those areas most affected by the hurricane, particularly in Florida and the Carolinas, as some businesses remained closed or were hard to reach.

Helene destroyed roads and disrupted railway operations in many of the affected states, and aside from the Port of Tampa, several other ports were shut, but activities were gradually resuming this week as recovery efforts were underway.

Aside from Hurricane Helene, the National Hurricane Center (NHC) was keeping a close watch over Tropical Storm Joyce, which began forming in the central tropical Atlantic Ocean on Friday, and Tropical Storm Kirk, which was detected in the eastern Atlantic Ocean on Monday. Joyce was downgraded from a tropical storm to a tropical depression as it lost strength. Kirk was expected to become a “large and powerful hurricane” by Tuesday night or Wednesday, according to the NHC, but there were no coastal watches or warnings in effect as the storm system did not appear to be a threat to land.

Back in June, the NHC had predicted that this year’s hurricane season would be one of the most active ones in history, triggering concerted efforts by both base oil buyers and suppliers to pad inventories in case of weather-related supply disruptions.

Another key development that participants mentioned as potentially having an impact on base oil and lubricant exports – particularly those done in flexibags and containers – was the longshoremen strike affecting many U.S. ports.

“Tens of thousands of longshoremen went on strike on October 1, shutting down major ports along the East and Gulf coasts and choking off deliveries of everything from produce to auto parts,” NBC News reported. Union leaders argued that global cargo carriers have raked in huge profits since pandemic-era supply-chain snags drove up freight rates, but workers have not benefitted from those gains.

Base oil market sources said that the strike’s impact would be limited if it lasted for about a week, but could have more serious repercussions on import and export activity if it lasted much longer.

Many base oil and lubricant industry participants were keeping an anxious eye on the strike and on hurricane-related developments while they were away at the Independent Lubricant Manufacturers Association’s annual event taking place in Colorado Springs, Colorado, on September 28 to October 1. Aside from attending presentations and networking, market players typically discuss contracts and fourth-quarter business during the event. Buyers hoped to secure competitive pricing as suppliers start to release inventories built ahead of the hurricane season. Many of these barrels of oil find their way into the export market, which often leads to downward price pressure.

Indeed, spot prices have been moving down on the back of posted price decreases implemented by a majority of producers during the month of September. The most recent price adjustments were applied on API Group I postings by HollyFrontier and Calumet. The producers lowered the posted price of Group I base oils by 20 cents per gallon across the board, effective September 23 and September 30, respectively. 

According to reports, ExxonMobil and Paulsboro have not announced posted decreases on their Group I base stocks, but sources said that the producers had granted temporary value allowances that were commensurate with the decreases conceded by the other Group I suppliers.

In early September, Group II, Group II+ and Group III producers had also reduced posted prices between 10 cents/gal and 50 cents/gal, depending on the grade and the supplier. SK Enmove also implemented additional 5 cents/gal to 20 cents/gal decreases on September 16, following the round of adjustments at the beginning of the month.

Naphthenic

Naphthenic base oil producers Ergon, Process Oils and Calumet also decreased prices by 20 cents/gal between September 16 and September 19, even though the supply and demand balance was tighter for the pale oils than for paraffinic oils. Most of the downward pressure had come from the crude oil and feedstock side, as prices had fallen significantly by the end of August compared to earlier in the month. A number of naphthenic accounts had already received decreases because their contracts were tied to a diesel index and diesel prices had slipped as well. San Joaquin Refining has so far not announced a general price decrease, but the producer continued to monitor market fundamentals and reported a balanced supply/demand position.

Spot supplies of Group II and Group III base oils were expected to be curtailed this month 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, offline 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, as they prioritized the production of base oils over that of competing fuels given higher margins, and Chevron’s turnaround also coincided with a period of slowing demand.

Exports

On the export front, paraffinic base oil prices continued to be exposed to downward pressure, although those grades that were less available such as the Group I bright stock and Group II 100 neutral carried more of a premium. There were discussions to move cargoes to Mexico, Brazil, West Coast South America (WCSA), India and Europe, but not all proposed transactions were able to be finalized given low bids against steep offers. Some buyers preferred to wait in hopes that prices would move lower in the coming weeks as supply was expected to lengthen, particularly since domestic consumption was not anticipated to show much improvement. Market prospects were rather “gloomy,” a source noted, voicing many participants’ sentiment as they did not expect fundamentals to change much before the end of the year.

In terms of Group III grades, Middle Eastern and Asian base oils continued to move to the U.S., where domestic supply has also grown as several Group II producers have favored the production of Group III oils given more advantageous price points. The ample supplies, coupled with lukewarm demand from the automotive segment, were exerting downward pressure on prices.

Crude

Upstream, crude oil futures continued to be swayed by geopolitical tensions and hostilities in the Middle East. Some attention was also focused on OPEC’s ministerial panel scheduled to meet on October 2 to discuss the current state of oil markets. A new economic stimulus package proposed in China might spur increased oil demand in the world’s top crude oil importing country, pressuring current supply levels.

On Tuesday, West Texas Intermediate (WTI) crude oil futures jumped by more than 2% after Iran fired missiles at Israel, fueling fears that Israel might target Iran’s nuclear facilities or oil infrastructure in response to the attack.

On October 1, WTI November 2024 futures settled on the Nymex at $69.83 per barrel, compared to $71.56/bbl for October futures on September 24.

Brent futures for December 2024 delivery were trading on the ICE at $75.15/bbl on October 1, compared to $75.06/bbl for November futures on September 24.

Louisiana Light Sweet crude wholesale spot prices were hovering at $71.25/bbl on September 30, from $72.83 on September 23, according to the U.S. Energy Information Administration (EIA).

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

Posted Paraffinic Base Oil Prices: October 2, 2024
(Prices are FOB basis, in U.S. dollars per gallon and U.S. dollars per metric ton).

Lubes’n’Greases Publications shall not be liable for commercial decisions based on the contents of this report.
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Historic and current base oil pricing data are available for purchase in Excel format.

*ExxonMobil prices obtained indirectly.
**Rerefiner