Previously, Cross Oil and Calumet had announced a similar increase of 20 cents/gal, which went into effect on March 23. Suppliers said the rising cost of feedstocks and transportation, together with the tight supply and demand ratio had motivated the increases.

Healthy demand, coupled with low supply levels, have resulted in a very snug balance, which was exacerbated by recent plant turnarounds. Most of the turnarounds on the naphthenic side have now been finalized, but it was heard that Cross Oil was managing inventories very cautiously after the producer completed a turnaround in late March.

The scheduled turnarounds followed unexpected plant outages in mid-February, which were brought about by freezing temperatures and ensuing power and water supply outages in large swaths of the United States. At least one of the affected producers has been able to restart all of its base oil units and was heard to be ramping up production. Even so, buyers were expected to see delays as the supplier was striving to catch up with a backlog of orders, sources explained.

A couple of API Group I and II base oil plants that had been undergoing turnarounds at the time of the storm also suffered setbacks because of the winter storm and had been forced to extend their shutdowns, further limiting domestic supply of Group I and II grades. One of the producers, Calumet, has been able to restart its base oil plant and has been producing base oils. The second supplier, HollyFrontier, has completed repairs, restarted its Group I plant last week, and was ramping up base oil production rates this week. The producer was not expected to have bright stock spot availability until May at the earliest.

On the paraffinic front, producers implemented increases ranging 20 to 55 cents per gallon, with their implementation dates peppered between March 19 and April 1. Motiva was one of the last producers to communicate increases during this round, with its Group II posted prices seeing hikes between 40 and 50 cents per gallon, and its Group III prices moving up by 55 cents/gal on April 1. Rerefiner Safety-Kleen implemented increases of 40-50 cents/gal on March 31. Given certain contract terms, a good number of buyers may not see prices go up until May 1, sources noted.

While finished lubricant and additive producers said that the increases were difficult to absorb, particularly as these followed two other rounds of base oil increases since the beginning of the year, they also admitted that many had no choice but to accept the hikes because there were few supply alternatives. Most base oil suppliers had very little extra product to offer, once contractual obligations had been met, and spot prices were soaring. This week, spot prices were again assessed stable to firm, with some numbers not moving up much given buyer resistance.

Finished lubricant and additive suppliers were planning to implement increases in their downstream segments in April. Additive suppliers were hoping to implement increases in the realm of 3-8%, but did not discard the need of further adjustments in May. Similarly, lubricant and grease manufacturers may be reviewing prices next month, as the increases in base oils and additives meant some of them would be selling finished products at a loss.

Many consumers were already starting to pad inventories to cover potential base oil supply disruptions during the hurricane season, which runs from June 1 to Nov. 30 in the Atlantic basin. 

This left minimal availability for export, with regular receivers in Mexico, India and Brazil, among other destinations, seeing a sharp drop in U.S. shipments in recent weeks. A couple of Group II light-viscosity cargoes were heard to have been shipped from the U.S. Gulf to India, but these volumes were said to be small compared to shipments routinely moving there in previous years. A light-grade parcel was also heard to have been offered to the Middle East.

Mexican buyers were clamoring for U.S. heavy grades, but have not been able to acquire much at all given the tight supply, sources said.

A number of base oil plants were scheduled for maintenance in the next few weeks. Ergon’s paraffinic Group I and Group II refinery in Newell, West Virginia, was slated to begin a 30-day turnaround on April 9. The company hoped to manage product inventories so as to minimize supply disruptions during the turnaround period and startup.

There were also rumblings that Paulsboro would have a brief turnaround of slightly over a week at its Group I unit in Paulsboro, New Jersey, in mid-April, according to market sources.

A rerefiner was also expected to shut down its plant in Ohio for a short turnaround sometime in the second or third quarter of the year.

The recent base oil increases had received support from rising crude oil values, but numbers have since declined. Crude oil futures slumped by more than $3 per barrel on Monday on expectations of rising supply from OPEC+ and higher Iranian output, following a meeting of the organization in which producers agreed to monthly production increases from May to July. COVID-19 infection spikes in many countries also dampened sentiment.

“Traders are still trying to decide whether this news is bullish or bearish. Does the production increase signal a confidence that demand is returning, or is it a signal that the OPEC+ alliance is caving and the market is about to get flooded?“ the Tank Tiger Bulletin reported. It added that the number of domestic oil rigs had increased this week as well, and that for the month of March, oil prices fell 3.8%, but jumped 22% in the first quarter.

On Tuesday, April 6, May WTI futures settled at $59.33 per barrel on the CME/Nymex, and had closed at $60.55/bbl on March 30.

Brent futures for June delivery settled at $62.74/bbl on the CME on April 6, from $64.14/bbl for May futures on March 30.

Light Louisiana Sweet crude wholesale spot prices were hovering at $60.88/bbl on April 5 and had closed at $63.64/bbl on March 29, according to the Energy Information Administration.

Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.

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.