Spot supply of naphthenic base oils seemed to have tightened on the back of recent turnarounds at Ergon’s and Calumet’s facilities, which have already been restarted. Calumet’s plant in Princeton, Louisiana, is “back up and running,” the company confirmed, following a two-week turnaround that started in early June.

The two producers met contractual requirements during their outages, but there were fewer extra barrels available, according to sources. Transformer oil has been tight for some time, and “the heavy grades seem to be getting snug as well,” a source noted.

While there had not been an “official” price increase on pale oils, there have been some upward adjustments of around 10 cents/gal on a number of accounts, or the lifting of temporary value adjustments driven by the rising price of crude oil and vacuum gas oil.

At the time of writing, no other pale oil price announcements were confirmed, but some players suggested that this may be the last chance for producers to adjust prices, as the market was facing an uncertain outlook.

On the paraffinic front, climbing crude oil and vacuum gas oil, together with a tightening of supplies, induced paraffinic base oil producers to initiate upward posted price adjustments in mid-June.

Domestic demand had been showing a steady rise since the easing of lockdown measures, while requirements from Mexico for light grades used for diesel blending had also improved.

These conditions prompted a vast majority of paraffinic producers to implement 15 to 16 cents-per-gallon posted price increases between June 15 and July 1.

One of the last producers to join the round of increases, SK Americas, will implement an increase of 15 cents/gal on its Group II+ and Group III base oils on July 1. The increase is reflected in the price table below.

Base oil requirements had shown an uptick after most states had eased their lockdowns and allowed businesses to reopen, but several governors have started to reverse these measures as new coronavirus cases multiplied, which could bring back some of the negative effects seen during the first wave.

More than a dozen states have now paused or rolled back their reopening plans as the U.S. sees a surge in coronavirus cases. Some states issued mandates for wearing masks, and closed down beaches ahead of the Fourth of July holiday, CNN.com reported.

If stay-at-home rules get reinstated, schools remain closed, and people delay the return to their workplaces, driving will again be limited, and this would result in decreased consumption of gasoline and lubricants.

The lubricant segments that serve the automotive industry have already been suffering from the slump in new car sales and the disruption of the manufacturing chain, with factories having had to shut down, or reduce operating rates all over the world since the start of the pandemic.

All of these developments hit ahead of one of the busiest driving periods of the summer in the U.S., the week of the Fourth of July holiday. This year, far fewer people were expected to leave their homes given the outbreak.

Another segment that has been adversely affected by the pandemic is the aviation industry–most airlines have had to drastically reduce their schedules as the number of passengers has plummeted. The new regulation that bans American tourists from entering countries within the European Union was expected to further exacerbate the situation. Falling demand for jet fuel has forced some refiners to dial down operating rates, and consumption of aviation lubricants have also experienced a steep drop.

Upstream, crude oil futures were range-bound on Tuesday, but ended lower from the previous session on concerns about the effects of the coronavirus spikes in the U.S.

Crude oil prices were expected to fall further on rising U.S. crude inventories and talk of a return of Libyan oil to the market, but these factors did not have as strong an effect as expected.

In addition to production cuts from OPEC+, low prices have allowed the market to achieve a more balanced outlook, as long as full compliance to the agreement is achieved, analysts said. The COVID-19 pandemic slammed prices to levels below $0 per barrel in late April, but U.S. crude’s 92% advance since then marks oil’s largest quarterly percentage gain in 30 years, the Wall Street Journal reported.

On Tuesday, June 30, August WTI futures settled at $39.27 per barrel on the CME/Nymex, and had closed $40.37/bbl on June 23.

Brent futures for August delivery closed at $41.15/bbl on the CME on June 30, from $42.63/bbl on June 23.

Light Louisiana Sweet crude wholesale spot prices settled at $41.02/bbl on June 29 and had closed at $41.10/bbl on June 22, according to the Energy Information Administration.

VGO was trading at August WTI plus $5.50/bbl (or $44.77/bbl) on Tuesday, June 30, according to OPIS/PetroChem Wire assessments.

Lubes’n’Greases Publications shall not be liable for commercial decisions based on the contents of this report.

Historic and current base oil pricing data are available for purchase in Excel format.