U.S. Base Oil Price Report

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Calumet, SK Americas, HollyFrontier, Petro-Canada, Paulsboro, Avista Oil and Safety-Kleen announced posted price increases, joining a group of other paraffinic suppliers who had communicated markups a week ago. On the naphthenic base oils side, Cross Oil, Ergon and Calumet will also be raising prices next week.

A fire that broke out at Ergon’s paraffinic refinery in West Virginia forced the producer to declare force majeure.

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Calumet communicated a price increase on all of its paraffinic oils, effective May 31. The company’s API Group I 600-vis cut moved up by 30 cents per gallon, its bright stock by 40 cents/gal, its Group II 75/80, 100 and 150 cuts edged up by 20 cents/gal, and its Group II 325 grade by 30 cents/gal.

SK raised its posted prices across the board by 30 cents/gal, with an effective date of June 1.

HollyFrontier will be increasing its Group I SN560 grade by 30 cents/gal and its bright stock by 40 cents/gal. Postings for all of the other Group I lower viscosity grades will remain unchanged. The price increases will go into effect on June 4.

Petro-Canada will be raising the posted price of all of its Group II base oils by 30 cents/gal, its Group II+ grades by 40 cents/gal and its Group III grades by 35 cents/gal on June 4.

Paulsboro informed its customers that the producer would be lifting its Group I heavy-vis grades by 30 cents/gal and its bright stock by 40 cents/gal as of June 4. The lighter viscosity grades will remain unchanged.

Avista Oil lifted the price of its Group II+ and Group III grades by 30 cents/gal, with an effective date of May 31.

Safety-Kleen also increased posted prices for its Group II+ 120-vis and 220/240-vis grades by 30 cents/gal in all regions, effective May 31. 

A number of paraffinic suppliers, including Chevron, Excel Paralubes, Phillips 66 and ExxonMobil had communicated 20, 30 and 40 cents/gal increases, depending on the grade, the previous week. Producers who do not publish posted prices also adjusted prices up by 30 cents/gal for most grades, sources said. This was the fifth price increase initiated by a majority of suppliers since January.

Motiva raised prices two weeks ago, and some participants thought this completed the previous string of price hikes, while others saw it as a prelude to the most recent round.

On the naphthenic base oils side, Cross Oil communicated that the company would be increasing the price of its 40 to 500 SUS (Saybolt Universal Seconds) base oils by 30 cents/gal, and its 750 SUS and higher SUS grades by 35 cents/gal, effective June 7. The producer will also limit orders to contract quantities during the transitional period and may limit sales based on available inventory.

Ergon announced an increase in pricing of naphthenic oils in the North American market by 30 cents/gal, effective June 7. The increase will apply to all viscosities.

Calumet communicated a price increase of 30 cents/gal on all naphthenic grades, effective June 8.

As industry participants headed to the first Independent Lubricant Manufacturers Association in-person meeting since the start of the pandemic in Orlando, Florida this week, both paraffinic and naphthenic producers and consumers reported an extremely tight supply situation.

Availability of the heavy grades and Group III cuts was described as very constrained. There was little relief in sight, because any additional barrels that came into the market appeared to be snatched up right away, making it difficult for suppliers to rebuild inventories. Stocks were uncomfortably low ahead of the hurricane season in the Atlantic basin, which runs from June 1 to Nov. 30. Most buyers and sellers try to pad inventories ahead of time to mitigate potential shortages caused by inclement weather.

Producers were trying to catch up on orders as well, as a number of them had suffered production disruptions and delivery delays due to various reasons, including a freezing winter storm in February and delayed restart processes following turnarounds.

This week, Ergon declared force majeure as a result of a significant fire at the company’s Newell, West Virginia, refinery on May 29. The base oil plant at the refinery produces Group I and Group II base oils. For more information about this incident, please see the news story in this issue of Lube Report Americas.

The outage at Ergon’s base oil plant was expected to exacerbate the tight supply conditions and sent buyers on a search for alternative sources of product. “The calls today have been relentless from customers looking for bright stock,” a seller conceded, while another noted that the incident would just add to the unbalanced market conditions.

Not only was a lack of base oil availability and additives impacting downstream operations, but a scarcity of truck drivers, trucks and railcars was also impacting logistics, sources said. Another issue that many manufacturers were facing was a shortage of packaging material.

Base oil spot prices were up again week on week, with domestic buyers showing strong buying appetite and leaving little availability for export. Transactions involving U.S. product were also difficult to conclude because prices have moved up so much that they were not workable in certain destinations. This was the case with the light grades that are typically purchased by Mexican buyers for fuel blending. On the other hand, given the steep prices seen in the U.S., a few cargoes may be shipped from other regions to fill some of the supply gaps as availability appeared to be improving at origins such as Asia.

The higher base oil prices continued to place upward pressure on downstream lubricants, greases, additives and other products. Lubricant manufacturers were in the midst of implementing price increases of between 3% and 15%, depending on previous initiatives, in late May through early June, following a round of base oil price increases in late April through early May.

The latest series of base oil price adjustments placed additional pressure on downstream products, and it has become increasingly difficult to absorb the rising production costs, sources said. As a result, fresh price initiatives started to surface for lubricants and additives during the week.

A number of finished lubricant manufacturers were heard to have announced increases between 8% and 14%, with implementation dates set for late June and July.

According to reports, additive suppliers have also announced increases. A large supplier was heard to be increasing additive prices by up to 8%, effective June 24, due to the higher raw material values and other production costs.

Aside from the serious supply tightness, base oil prices received support from steep crude oil and feedstock values. Oil futures ended last week more than 5% higher, with Brent closing at $69.63 a barrel – a two-year high – and West Texas Intermediate crude for July closing at $68.85.

Futures continued to rise on Tuesday, with Brent jumping briefly over the $71 per barrel mark on prospects of healthy demand during the summer driving season in the U.S. and an increase in air travel. Prices also received a boost from data showing that China’s factory activity in May grew at its fastest this year.

As a result, OPEC+ agreed to increase output during their meeting this week. The oil rig count in the U.S. has also increased for nine months in a row. Some analysts cautioned that if too much crude oil comes into the market, prices will decline, particularly if sanctions on Iranian exports are lifted.

On Tuesday, June 1, July WTI futures settled at $67.72 per barrel on the CME/Nymex, and had closed at $66.07/bbl on May 25.

Brent futures for August delivery settled at $70.25/bbl on the CME on June 1, from $68.65/bbl for July futures on May 25.

Light Louisiana Sweet crude wholesale spot prices were hovering at $68.46/bbl on May 28 and had closed at $68.23/bbl on May 24, according to the Energy Information Administration. There was no trading on Monday, May 31 due to the Memorial Day holiday.

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.