U.S. Base Oil Price Report


While the supply and demand tightness witnessed since late 2020 has started to ease in some base oil segments, the United States market was not overflowing with product. Several grades remained extremely tight and suppliers continued to struggle with filling orders and meeting delivery deadlines.

The lighter grades have shown better availability than their heavier counterparts, with the heavy-vis API Group I and Group II cuts slightly more difficult to locate. A few light viscosity cargoes have been booked for shipment to India, denoting that there were spot volumes that suppliers were able to place into the export market after making some price accommodations. A couple of base oils cargoes were also being discussed for shipment from the U.S. Gulf to Brazil and Ecuador in the second half of August. Spot export prices for these grades were more exposed to downward pressure than volumes sold into the domestic market.

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At the same time, Group I SN 500 and bright stock, Group II 600N and Group III 4 centiStoke presented more challenges and most producers were not able to offer spot volumes. In fact, a majority of suppliers were working through a backlog of orders, with some shipments not expected to reach customers until October or November, particularly those expecting to receive bright stock and Group II heavy grades.

Refiners were heard to have enhanced heavy viscosity base stock production whenever possible as these were the products that most buyers had been clamoring for during the past year, but supply was still stretched.

Given prevailing snug fundamentals for many base oil grades in the Americas, a number of spot cargoes have moved from Northeast Asia, the Middle East and the Baltic region to fill supply gaps that regional producers have been unable to meet.

A few light-viscosity grades were booked for shipment from South Korea and the Baltic to Brownsville, Texas, likely to be shipped on to Mexico to be used as fuel extender.

A base oils parcel was discussed for end-August shipment from Yanbu and Jeddah, Saudi Arabia, to Rio de Janeiro, Brazil. Several Northeast Asia and Baltic base oil cargoes were also offered at competitive prices to buyers in South America.

Looking ahead, the seasonal slowdown typically affecting base oil sales in the last quarter of the year was expected to be mitigated by strong demand in the preceding months and the backlog of orders that were waiting to be filled. Should any unplanned events – such as a hurricane – cause production issues, the shortages could become more pronounced as most buyers and sellers were carrying limited inventories.

Chevron was heard to be planning to take its Pascagoula, Mississippi, Group II base oils plant off line for maintenance in the last quarter of the year or early next year, according to sources, although this could not be confirmed with the producer directly. The shutdown could ensue in further tightening of the Group II segment. The Pascagoula plant has a nameplate capacity of 25,000 barrels per day, according to Lubes’n’Greases Guide to Global Base Oil Refining.

On the naphthenic base oils front, steady demand and strained supply levels continued to support price indications. Demand has been particularly robust from Latin America, Asia and Europe. Naphthenic price increases of 30 cents per gallon were fully implemented between July 5 and July 12, and no further adjustments have been communicated. Demand from Latin America, Europe and Asia was still thriving, contributing to the tight conditions in the domestic market, sources said.

A minor turnaround at Cross Oil‘s Smackover, Arkansas, base oil plant in September might tighten availability of pale oils further. The maintenance will last approximately 12 days, starting on September 13, and will involve a catalyst change. The unit can produce 5,000 barrels per day of naphthenic base oils.

Valero was heard to have improved operating rates, following an unplanned shutdown caused by a fire at its Three Rivers, Texas, refinery in June and a production outage during the severe winter storm in February. The refinery has capacity to produce 2,400 barrels per day of naphthenic base oils.

Meanwhile, in downstream segments, manufacturers of lubricants, greases and additives have made concerted efforts to increase finished product prices to offset the relentless climb in raw materials, transportation, packaging and labor costs taking place over the last several months. While there were only sporadic announcements made for August hikes, blenders were still trying to compensate for base oil price increases that were implemented back in June.

A few blenders also acknowledged lingering difficulties in sourcing certain base stocks and additives, which have resulted in reduced operating rates at some blending plants and product allocations. While this led to slightly depressed consumption of Group III grades for automotive applications, predictions of improved additive availability in the coming weeks as suppliers have been trying to catch up with orders has spurred increased buying appetite for high performance base oils.

Pressure from upstream crude oil and feedstocks has weakened over the last three weeks as oil values have retreated. Oil prices settled lower on Tuesday on weak Chinese economic data. China’s July refining report reflected its weakest performance since May 2020, dampening hopes that Chinese demand would bounce back soon. Indications that OPEC+ will not yield to the U.S. call to increase production and the spread of the Delta variant also fueled concerns about short-term crude oil consumption.

West Texas Intermediate (WTI) September futures settled at $66.59/barrel on August 17, from $68.29/bbl on Aug. 10.

Brent futures for October delivery settled at $69.03/bbl on the CME on Aug. 10, from $70.63/bbl on Aug. 3.

Light Louisiana Sweet crude wholesale spot prices were hovering at $68.14/bbl on Aug. 16, from $67.16/bbl on Aug. 9, 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.