U.S. Base Oil Price Report


Paulsboro‘s posted price increases will go into effect this week, rounding up a series of initiatives implemented by paraffinic base oil producers since the beginning of the month.

Paulsboro will be increasing all of its API Group I base oils by 20 cents per gallon as of Jan. 29.

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Motiva was the first out the gate with an increase of 30 cents/gal for all of its Group II and III base oils, implemented on Jan. 13, which was quickly followed by a majority of Group I and Group II suppliers. ExxonMobil was reported to be the only producer to have raised Group II+ postings, and Motiva the only player to mark up Group III pricing at this time.

The increases, which lifted posted prices by 20, 25, 27, 29 and 30 cents/gal – depending on the cut and the producer – saw implementation dates between Jan. 13 and Jan. 29.

Despite the recent retreat of crude oil values, firmer raw material prices at the time of the announcements, together with a tightening market scenario, were said to be behind the initiatives. Paraffinic posted prices had effectively not experienced any adjustments since May 2019, and naphthenic prices since last June, and margins had been compressed for some time, sources explained.

While supply was deemed more than adequate to cover current requirements, buying appetite has been gradually increasing with the return to business following the year-end holidays, and was expected to strengthen ahead of the spring season.

In the finished lubricants, additives and packaging segments, several price increase initiatives have surfaced as a result of the base oil price hikes. Since most of the increases will become effective in February and March, demand for finished lubes has increased this month as buyers hoped to beat the hikes, sources said. (For further details, see “U.S. Finished Lube Prices Spike” in this issue of Lube Report).

A planned catalyst change at the Excel Paralubes Group II plant in Lake Charles, Louisiana, in February, together with trimmed operating rates at other facilities and increasing export volumes were anticipated to result in reduced domestic base stock supply.

Interest in U.S. Group I and II cargoes from European consumers was expected to remain healthy, as availabilities in that region have dwindled. It was still unclear when the quota of 200,000 metric tons of imported Group II cargoes that can enter the European Union without tariffs would be met – and the quota will not be renewed until mid-2020. Once the quota is fulfilled, imports will be subject to a 3.7 percent tariff, which will make foreign cargoes less attractive.

While European Group II volumes will be available from the ExxonMobil plant in Rotterdam, The Netherlands, Group I barrels may be more difficult to come by due to a rationalization of Group I plants. The output from the Rotterdam plant alone is not sufficient to cover regional Group II requirements either, sources noted.

U.S. Gulf Group I and Group II suppliers also expected demand from Mexico to pick up over the next few weeks, as local production at Pemex‘s base oil plant remained unstable, and Mexican end-users continued to use light-viscosity grades for fuel blending and other applications. Much of the buying interest in Mexico was linked to spot purchases as buyers tried to avoid the increases tied to contract business, according to sources.

Upstream, crude oil futures were weighed down by fears surrounding the spread of the coronavirus, which triggered concerns that the outbreak would reduce Chinas already slowing GDP growth rate and the country’s oil consumption.However, the price slide was stemmed on Tuesday after OPEC+ announced that oil producers were considering an extension of the output cuts until June of this year, from an original date in March.

On Tuesday, Jan. 28, West Texas Intermediate futures settled at $53.48 per barrel on the CME/Nymex, and had closed at $58.34/bbl on Jan. 21.

Brent futures for March delivery were reported at $59.51/bbl on the CME on Jan. 28, from $64.59/bbl on Jan. 21.

Light Louisiana Sweet crude settled at $57.34 on Jan. 27, according to the Energy Information Administration.

In related production news, Motiva was heard to have shut down the fluid catalytic cracking unit (FCCU) at its Port Arthur, Texas, refinery on Jan. 26 to complete a scheduled overhaul that will last 50 days, according to sources and media reports. Motiva also plans to idle the alkylation unit and the cat feed hydrotreater for a 30-day shutdown. There was no information regarding the potential impact on feedstocks for base oil production, and the producer does not generally comment on plant operations.

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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