U.S. Base Oil Price Report

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Petro-Canada, SK Americas and Safety-Kleen rounded off the list of companies that announced posted price increases this month. On the naphthenic base oils side, San Joaquin Refining also joined other pale oil producers that had communicated markups.

Petro-Canada raised the postings of its API Group II, II+ and III base oils on Dec. 14. The producer’s Group II 70, 100, 200 and 300/350 grades increased by 25 cents per gallon and the Group II 600/650 grade moved up by 30 cents/gal. All of Petro-Canada’s Group II+ and Group III prices were lifted by 20 cents/gal as reflected in the Price Table below. The company had previously adjusted prices on Nov. 23.

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SK Americas also announced that the company would raise its Group II+ and Group III posted prices by 25 cents/gal, effective Dec 16. The company last revised postings on Nov. 23.

Within the Group II+ and Group III segments, Phillips 66 also adjusted prices, first on Nov. 18, and later on Dec. 9.

Rerefiner Safety-Kleen increased its Group II+ posted prices by 25 cents/gal on the 120-vis grade and 25 cents/gal on the 220/240-vis grade too, with an effective date of Dec. 9.

Most paraffinic producers have now raised prices by 20, 25, 26 and 30 cents/gal, depending on the grade, with increases going into effect between Dec. 7 and Dec. 16. The movement was driven by a snug supply-demand balance and rising production costs. This was the result of hurricane-related production outages on the United States Gulf Coast starting back in late August, along with ongoing reduced run rates and healthy consumption levels, both from the domestic and export sectors.

The Group I segment continued to report tight conditions, with bright stock’s availability in particular said to be very limited, with close to no spot cargoes on offer. This grade was highly sought by Latin American market participants and remained strained not only in North America, but in Europe and Asia as well.

“We are receiving many requests for bright stock, which we are turning down. I don’t think there is any spot available out of the U.S.,” a supplier emphasized. Demand for Group I light-vis grades from Mexico was still characterized as healthy, and there appeared to be little resistance to the higher spot price indications.

Group II spot availability has improved, as a couple of refiners have increased operating rates, but it appeared to be quickly soaked up by market players looking to move product to India, Mexico and Brazil.

There were reports that Mexican base oil import regulations would tighten, as additional requirements of documentation about contract terms and proof of storage were expected to be implemented, placing pressure on importers and pricing. Additionally, importers may be asked to show that base oils will be used to manufacture finished lubricants. This may place a damper on imports from the United States, as a large portion of material exported to Mexico is used for fuel blending. The new regulations were expected to go into effect in mid-January next year. Participants said it was too early to say what impact this would have on exports.

Group III spot prices also edged up on the back of rising posted prices, which underwent two upward adjustments in the span of a month.

While base oil margins have declined compared to a month ago because of rising crude oil and feedstock values, premiums over low-sulfur vacuum gas oil values were still hovering at much higher levels than at the same time last year, sources said.

There was also talk about a possible price adjustment in downstream finished lubricants, greases and additives segments on the back of rising base oil prices. Reports that at least one lubricant manufacturer intended to increase prices by 10-12% in mid-January surfaced during the week.

Participants expected market activity to slow down slightly given the recent increases and the approach of the year-end holidays, but were hopeful that business would pick up again in January as most blenders seem to be operating with low inventories.

Buyers were also aware that refiners continued to run units at reduced operating rates due to lackluster demand for fuels, and that there was little extra base oil available. As a result, they were anxious to secure supply for the next few weeks.

On the naphthenic front, San Joaquin Refining notified its customers that the company would increase prices by 20-30 cents/gal, depending on product and location, effective Dec. 15.

Ergon communicated that the company would be increasing all of its naphthenic grades by 20 cents/gal with an effective date of Dec. 18, instead of Dec. 11 as reported here last week.

Calumet also notified customers of a price increase on all naphthenic grades of 25 cents/gal, effective Dec. 18.

Another naphthenic oil producer, Cross Oil, completed the process of adjusting prices on all of its base oil accounts on Dec. 1, with its light grades moving up by 25 cents/gal and its heavy cuts by 20 cents/gal.

Upstream, crude oil futures have risen to their highest levels since March after OPEC+ had agreed to a new production quota, and coronavirus vaccination campaigns were being rolled out in North America and Europe.

However, prices came under pressure as OPEC reduced its projections for global fuel consumption in the first quarter of 2021 by 1 million barrels a day, and several countries tightened coronavirus restrictions as the number of virus-related infections and deaths continued to rise. This would likely weigh on crude demand, analysts said. OPEC+ was expected to meet on January 4 to discuss whether its members can stick to a plan of further monthly output increases.

On Tuesday, Dec. 15, January 2021 WTI futures settled at $47.62 per barrel on the CME/Nymex and had closed at $45.60/bbl on Dec. 8.

Brent futures for February delivery settled at $50.76/bbl on the CME on Dec. 15, from $48.84/bbl on Dec. 8.

Light Louisiana Sweet crude wholesale spot prices closed at $49.02/bbl on Dec. 14 and had closed at $47.42/bbl on Dec. 7, 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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