U.S. Base Oil Price Report


Excel Paralubes, Phillips 66 and Paulsboro implemented posted price increases this week, completing a round of markups that started on Sept. 7 with Motiva’s initiative. On the naphthenic front, Cross Oil communicated a price increase as well.

The hikes were thought to have been driven by a tighter supply scenario – following weather-related output issues along the United States Gulf Coast – further recovery in demand levels after business reopenings, and firm crude oil and feedstock prices.

Excel Paralubes lifted its API Group II Pure Performance 70N by 20 cents per gallon, its 110N by 15 cents/gal, its 225N by 25 cents/gal, and its 600N by 20 cents/gal, all effective Sept. 24.

Phillips 66 also communicated that effective Sept. 24, the company would be raising its Group II+/III Ultra-S® Base Oil posted prices by 15 cents/gal across the board.

Paulsboro will be increasing its Group I posted prices, effective October 1. The producer’s 500, 600 and 700-vis cuts will be lifted by 20 cents/gal, while its bright stock will go up by 25 cents/gal.

A vast majority of suppliers had adjusted up postings by 15, 20, 25 and 30 cents per gallon during the previous three weeks, depending on the grade and the supplier.

ExxonMobil, Paulsboro and Avista Oil set a precedent for the most recent string of increases in early August, when these producers had lifted posted prices, but had not been followed by other suppliers. This time, however, the upward movements received additional support from higher spot values, as numbers had been inching up on the back of healthy export transactions.

Nevertheless, there were reports that some of the adjustments sought by a major supplier had seen much resistance among buyers, since this was the second increase in about a month. Sources said that the increases on the high-viscosity grades had not yet been fully implemented.

On the naphthenic side, Cross Oil communicated that the company would be increasing the price on low viscosity base oils, ranging in viscosity from 30 SUS (Saybolt Universal Seconds) to 300 SYS by 25 cents/gal. High-viscosity grades, ranging in viscosity from 500 SUS to 3500 SUS will be lifted by 15 cents/gal, effective Oct. 13.

The company explained that “Several market factors have prompted this increase, including the continued cost of handling refinery by-products in a very weak distillate market and recent increases in the cost of crude. In addition, the COVID-19 pandemic continues to impact the viability of the current price environment.”

Reports that naphthenic base oil producers had started to adjust up prices into a number of accounts had trickled in before Cross Oil’s initiative was announced. Tighter supply of the light grades offered support to the steeper numbers for these grades, sources noted.

Meanwhile, the paraffinic API Group I sector continued to report snug conditions, with domestic demand showing steady levels. “We had our best month since the downturn in April, but total demand has not recovered completely,” a supplier noted. While a few buyers questioned whether the trend would be sustained in October, sellers appeared confident that conditions would remain favorable in the coming month, but may change in November and December due to the seasonal practice of lowering inventories before year-end.

Exports to Mexico continue to draw on U.S. supplies, but the market there “is a mixed bag,” a source commented. Demand for the light grades used for fuel blending has not been very strong and prices have not risen much because diesel is being imported into Mexico from the U.S. at competitive prices. The mid and heavy-vis cuts were heard to enjoy better demand given reduced availability of Group II cuts in the U.S.

The Group II segment had been the stage of a flurry of shipments to India, Singapore, and South America, among other destinations, from June to August. This reduced the amount of product available for spot transactions in the U.S., but the situation may change next month as demand typically starts to taper off in the fourth quarter.

Additionally, weather-related shutdowns and reduced run rates at a few refineries further limited supply, although a return to normal operations may result in improved availability levels.

Hurricanes Marco, Laura, Sally and Tropical Storm Beta forced producers with facilities along the U.S. Gulf Coast to take precautionary measures ahead of severe weather conditions, which led to reduced rates at a number of facilities, and to a complete halt in production at Excel Paralubes’ Group II base oil plant near Lake Charles, Louisiana.

The unit was taken off-line ahead of Hurricane Laura and was heard to be still down, but was expected to resume production in the second half of October, when the Phillips 66 refinery, which supplies the plant with feedstock, was anticipated to be restarted. The local power company was also working on restoring the power grid in the area, as it had been severely damaged by the hurricane.

Sources also reported that Calcasieu Refining’s 135,500 barrels per day refinery in Lake Charles, which supplies some feedstock to both the Excel Paralubes plant and the Chevron base oil plant in Pascagoula, Mississippi, was anticipated to remain closed until further notice. The refinery was shut down ahead of Hurricane Laura and did not suffer significant damages, but may not be restarted for a while due to market economics, a Sept. 9 article in The Advocate reported.

Most recent series of base oil price increases, together with previous adjustments, have triggered increase announcements in the downstream lubricant and additives segment, with a growing number of independent lubricant blenders announcing increases for finished lubricants and other products of 32-40 cents/gal, or about 8-14%, to be implemented in early to mid-October.

A wave of orders followed the increase announcements, as lubricant consumers rushed to secure product before the increases went into effect. Sellers kept a realistic perspective and said that while demand seems to have returned to pre-pandemic levels this month, it was unlikely to retain its strength in the last quarter of the year.

Upstream, crude oil futures continued to trade within a narrow band, with numbers edging down on concerns about rising coronavirus cases in many countries, which may lead to renewed restrictions and lockdowns, and this would impact crude oil demand.

In other oil-related news, Devon Energy and WPX Energy were discussing a merger to mitigate the impact of the pandemic, the Wall Street Journal reported. Given the current state of the industry, sources said it would not be surprising to see more mergers being announced in the next few months.

On Tuesday, Sept. 29, November WTI futures settled at $39.29 per barrel on the CME/Nymex and had closed at $39.60/bbl for October futures on Sept. 22.

Brent futures for November delivery closed at $41.03/bbl on the CME on Sept. 29, from $41.72/bbl on Sept. 22.

Light Louisiana Sweet crude wholesale spot prices settled at $41.97/bbl on Sept. 28 and had closed at $40.51/bbl on Sept. 21, 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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