U.S. Base Oil Price Report


Market participants kept their ears open regarding potential increase announcements, following last week’s reports that ExxonMobil would raise its API Group I, II and II+ posted prices this month. On the naphthenic front, San Joaquin Refining communicated an increase to be implemented a few days after other producers’ recent hikes.

According to sources, ExxonMobil intended to lift the posted price of its API Group I light and mid-viscosity grades by 15 cents per gallon, its heavy grades by 25 cents/gal and its bright stock by 30 cents/gal. On Group II/II+ products, the producer will increase its light and mid-viscosity grades (EHC65 and EHC45) by 15 cents/gal and its heavy-vis grade (EHC120) by 25 cents/gal. This cut is currently not included in the price table below. The price table was revised to reflect these increases, which are scheduled to go into effect Aug 10.

Paulsboro typically adjusts its Group I prices shortly after the ExxonMobil increases go into effect, but no official communication had been sent by the publishing deadline.

A certain amount of skepticism still remains among market participants about whether the proposed paraffinic base oil increases would be pushed through in their entirety, as there was temperate market support for the increases, and other producers had not followed suit. At the time of writing, no other paraffinic base oil suppliers had stepped out with increase announcements.

Observers acknowledged that the current industry environment was very challenging as there was price pressure from the feedstock side and product availability had tightened. But there were also many uncertainties in terms of short-term demand, given the effects of the coronavirus pandemic on base oil, lubricants, greases and additives consumption.

Many U.S. states reversed business openings and were still considering whether to reopen schools, while the country registered growing unemployment figures. The reduced mobility of the population resulted in more limited use of personal cars and public transportation and this, in turn, led to lower fuel and lubricant demand levels.

However, new coronavirus cases appeared to be leveling off in some states, with the governor of California commenting that the state had achieved “stabilization,” according to media reports.

There was also positive news about encouraging results in two preliminary studies for a coronavirus vaccine developed by Novavax, the little-known Maryland company that received $1.6 billion from the federal government to produce an experimental vaccine, The New York Times reported.

On the naphthenics side of the business, San Joaquin joined producers Ergon, Cross Oil and Calumet, who implemented increases on July 31, and communicated a price increase of 25 cents/gal across the board, effective Aug. 4.

The naphthenic base oil segment was described as fairly balanced, even though a couple of base oil grades appeared to be in more limited supply than others. Sources said that turnarounds earlier in the year and the idling of a couple of naphthenic base oil plants over the past few years, including the Isla Refinery on Curacao, were partly to blame for the tightening of supplies, despite a slowdown in activity caused by the coronavirus pandemic.

Meanwhile, another segment that appeared to be feeling the effects of the pandemic was the exports sector. Although several Group I and II cargoes were heard to have shipped from the United States to India, Brazil, Mexico and the Middle East during June and July, demand appeared to be abating, although several parcels were earmarked for August lifting to India.

Mexico was still the destination for numerous U.S. cargoes, particularly naphthenic base oils and light paraffinic grades used for fuel blending, but the country was facing a steep increase in COVID-19 infections and deaths, which were not only straining the health system, but also the economy.

U.S. market players also prepared contingency stocks for possible weather-related output disruptions, as this year’s hurricane season was forecast to be a busy one. Some buyers may be holding off on acquiring additional base oil barrels for a while. On Monday, Tropical Storm Isaias made landfall in North Carolina, and was traveling up the East Coast, bringing flash floods, storm surges and possibly tornadoes, the National Hurricane Center said.

Upstream, crude oil futures edged up on Monday on better-than-expected data about manufacturing activity in Asia, Europe and the United States, and retreated in early trade on Tuesday on concerns about fuel demand growth as a fresh wave of virus infections around the world triggered renewed lockdowns. This coincided with major oil producers indicating that they would start to ramp up output on Aug. 1.

However, futures jumped late in the day as the American Petroleum Institute reported a larger-than-expected draw in crude oil inventories for the week ending July 31.

September WTI futures settled at $41.70 per barrel on the CME/Nymex on August 4, and had closed $41.04/bbl on July 28.

Brent futures for October delivery closed at $44.43/bbl on the CME on Aug. 4, from $43.22/bbl for September futures on July 28.

Light Louisiana Sweet crude wholesale spot prices settled at $42.48/bbl on Aug. 3 and had closed at $42.66/bbl on July 27, according to the Energy Information Administration.

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.

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