U.S. Base Oil Price Report

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Base oil facilities along the United States Gulf Coast appeared to largely avoid damage over the weekend from Hurricane Ida, but the market was still waiting to see the storm’s impact on supply of fuels, natural gas and electricity. In pricing news, Motiva implemented an increase on its API Group III base oils last Thursday, while Petro-Canada communicated markups for its Group III cuts as well.

Hurricane Ida was upgraded to a Category 4 hurricane before it made landfall in southeastern Louisiana on Aug. 29. A hurricane watch had been in effect from Intracoastal City, Louisiana, to the Louisiana/Mississippi border, as well as New Orleans, Lake Pontchartrain and Lake Maurepas, according to the National Hurricane Center. By Monday, the hurricane had weakened to a tropical depression as it headed towards Tennessee.

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The powerful tropical weather system brought winds of up to 150 miles per hour, along with heavy rains and a storm surge, causing flooding and a massive power outage that left more than one million homes and businesses without electricity in Louisiana, and another 90,000 in Mississippi. Ida also forced the partial closure of the Colonial Pipeline, a key refined products artery supplying the South and East coasts, S&P Global Platts reported, and of the Stolthaven terminal in Braithwaite, near New Orleans, which is utilized by key Group III importers. (For further information, see “Industry Weathers Scare from Ida” in this issue of Lube Report).

In pricing news, Motiva increased its Group III postings on Aug. 26, but left its Group II prices intact. The company lifted the posted price of its Group III 4 cSt grade by 55 cents per gallon and the 6 cSt grade by 50 cents/gal. Sources conjectured that this was a market adjustment and that Motiva had raised its Group III prices to bring them more in line with S-Oil postings – which are currently marketed by Phillips 66 – as Motiva will be assuming the marketing and sales of S-Oil products in January 2022.

Given strong market fundamentals and dwindling supply, Petro-Canada communicated a posted price increase of 55 cents/gal across the board for its Group III 4, 6 and 8 cSt base oils, with an effective date of Sept. 7. Postings for the company’s Group II and Group II+ cuts will remain unchanged.

Other producers were keeping a watchful eye on market developments, particularly those related to Hurricane Ida and its impact on base oil supply and demand fundamentals, to evaluate whether price adjustments would be necessary. The full impact of the hurricane would not be known for a while, sources commented.

The naphthenic base oils segment may see tighter conditions as Cross Oil will embark on a minor turnaround at is Smackover, Arkansas, base oil plant, this month. The maintenance will last approximately 12 days, starting on Sept. 13, and will involve a catalyst change. The unit can produce 5,000 barrels per day of naphthenic base oils, according to Lubes’n’Greases Guide to Global Base Oil Refining.

Naphthenic base oils have seen snug conditions given healthy demand against strained supply for most of the year, with spot volumes of the heavy oils such as the pale 500, 750 and 2000 described as limited.

Downstream lubricants, greases and other finished product manufacturers were also monitoring production issues that may arise from shutdowns and other disruptions caused by the storm. Several petrochemical plants located along the Gulf Coast have been forced to shut down, which might further impact the supply of additives and other chemical components used in lubricant production.

Given several rounds of base oil price increases since the beginning of the year, a number of manufacturers and blenders were hoping to implement price markups on their products in September.

Upstream, crude oil prices moved up on Monday after Hurricane Ida forced the shutdown of more than 95% of the U.S. Gulf production and the dollar weakened on the latest indications from the U.S. Federal Reserve.

Analysts said that any potential refining margin strength as a result of Ida would likely be less dramatic or more short-lived than expected because global refining was outpacing consumption due to COVID-related demand destruction.

West Texas Intermediate (WTI) October futures settled at $68.50/barrel on August 31, from $67.54/bbl on Aug. 24.

Brent futures for October delivery settled at $72.99/bbl on the CME on Aug. 31, from $71.05/bbl on Aug. 24.

Light Louisiana Sweet crude wholesale spot prices were hovering at $70.68/bbl on Aug. 30, from $66.45/bbl on Aug. 23, 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.