U.S. Base Oil Price Report

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San Joaquin Refining communicated a price increase for its naphthenic base oils on the heels of similar initiatives by Cross Oil and Calumet. A tight supply and demand balance, along with upcoming maintenance shutdowns and firm feedstock prices provided impetus to the initiatives.

San Joaquin informed its customers that due to increased demand and changing market conditions, the company would be lifting the price of all of its naphthenic base oils by 25 cents per gallon, effective September 28, with the price based on ship date, not order date, a company source said.

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Last week, Cross Oil and Calumet informed their respective customers that the price of naphthenic base oils would be raised by 25 cents per gallon, with an effective date of Sept. 22 in the case of Cross Oil, and Sep. 21 for Calumet’s accounts. The increase was prompted by increases in crude oil, natural gas, and transportation. Other suppliers were also monitoring the market closely to evaluate whether to adjust prices.

The naphthenic base oil sector has exhibited strained supply conditions since the last quarter of 2020, exacerbated by unplanned outages and maintenance programs this year.

Cross Oil took its Smackover, Arkansas, naphthenic base oils plant off-line on Sep. 13 for 12 days to complete a catalyst change in the hydrotreater, and the shutdown was proceeding as scheduled, a company source said. The unit has a nameplate capacity of 5,000 barrels per day of naphthenic base oils, according to Lubes’n’Greases’ Base Stock Plant Data.

Ergon announced that the company’s naphthenic refinery in Vicksburg, Mississippi, has scheduled a planned maintenance event beginning Oct. 23. “Various operating units of the Ergon Refining plant will be down for seven to 16 days as the company implements several reliability improvements to further support secure supply of products to customers,” the company explained in a press release on Sep. 21. No supply interruptions were expected for Ergon’s current ratable customers, as product inventory levels are sufficient to support sales during the planned outage. Ergon’s base oil plant in Vicksburg can produce 25,000 b/d of naphthenic base oils.

Calumet has scheduled a turnaround that will last one to two weeks at its Princeton, Louisiana, plant in early November. The unit can produce 6,900 b/d of naphthenic base oils.

Operations at a U.S. Gulf refinery were sputtering along, with the supplier having suffered a setback during the winter storm in February and continuing to be plagued by production issues. The producer was striving to catch up on orders, according to sources.

Meanwhile, the base oils industry was trying to cope with the recent disruptions caused by Hurricane Ida at the end of August and Tropical Storm Nicholas last week.

While the storms caused relatively minor damage to base oil facilities located along the Texas, Louisiana and Mississippi coasts, it was the logistics and transportation segment that seemed to have been the most severely affected, as widespread power outages curtailed many terminal and port operations. Several facilities were forced to run on their own generators and had reduced operations, while flooded train tracks and railcar re-routing contributed to the disruptions.

However, reports this week pointed to the gradual improvement of conditions, with the Stolthaven terminal near New Orleans reportedly running at normal rates this week. The terminal had been running at reduced rates due to the power outage brought on by Ida. This had caused delays and tight availability of Group III base oils, among other feedstocks, as the Stolthaven terminal is a key distribution point for Group III imports to the U.S. from South Korea and the Middle East.

Penthol imports Middle East Group III base oils into the U.S. and utilizes the Stolthaven terminal. The supplier said that its shipments from the terminal had resumed and the company was close to catching up with all delivery commitments. “We lost almost ten days, but we are now back to normal operations and are making shipments as usual,” the supplier explained.

In terms of base oil production, a majority of facilities affected by the storms have resumed production. ExxonMobil‘s refineries in Baytown and Beaumont, Texas, were operating normally, according to sources. ExxonMobil’s Baytown base oil plant can produce 8,200 b/d of Group I and 18,800 b/d of Group II base oils.

Phillips 66 stated on its website that the company had activated a hurricane preparedness plan at its Lake Charles complex – which houses Excel Paralubes‘ 22,000 b/d Group II base oil plant – ahead of the storms, and that there had been no impact to operations.

There have also been reports of serious production issues at a major additives producer in Belle Chasse, Louisiana, caused by Hurricane Ida, but further details were not available.

Passenger car motor oil additive supply issues were also reported from another major additive producer, which caused volumes delivered to some customers to be substantially reduced. The afflicted supplier did not anticipate the situation to improve until late October, and even then, supply of most of its additives may not be sufficient to cover demand. Sources also commented that additive suppliers did not expect the market to regain a fully balanced state until sometime in the first quarter of 2022, and that allocations may continue for a while.

The logistical and transportation issues triggered by the storms drove manufacturing costs up, and this, together with firm base oil and additive values and short supply of Group III, placed pressure on downstream lubricant and grease manufacturers, who were hoping to offset the rising costs by announcing markups.

This week, Omni Specialty Packaging communicated a price increase of up to 8% on conventional lubricants, up to 12% on full synthetic lubricants, and

up to 8-10% on brake fluids, effective October 15.

A number of other manufacturers, including Old World Industries, Smitty’s Supply, CAM2 International, and Nu-Tier Brands International/Gulf Lubricants had earlier announced increases for their finished products, synthetic lubricants, conventional oils and greases, of between 5% to 15% for late September and October implementation.

Some lubricants and finished product manufacturers said they had introduced increases on select accounts, depending on contract terms and conditions.

While the base oil supply situation remained tight in the U.S., there have been export movements to Mexico, India and other destinations. A 13,000 metric ton cargo was on the table to be shipped to India in mid Sep., while another parcel was discussed for Europe. Mexican demand remained steady and aside from U.S. base oils, several shipments from Asia and the Baltic were booked to cover requirements. Bright stock was still extremely tight, but a supplier was heard to have earmarked some volumes for spot business.

Upstream, crude oil futures strengthened on Tuesday, after sharp losses the previous session, on the back of tighter U.S. supplies because of outages caused by the recent storms. This halted a downward trend triggered by global concerns about the potential impact on China’s economy of a debt crisis at property group China Evergrande.

According to a Reuters report, about 18% of the U.S. Gulf’s oil and 27% of its natural gas production remained offline on Monday, more than three weeks after Hurricane Ida, the Bureau of Safety and Environmental Enforcement (BSEE) said. Royal Dutch Shell, the largest U.S. Gulf of Mexico oil producer, acknowledged on Monday that damage to offshore transfer facilities from Hurricane Ida will cut production into early next year. 

On Sep. 21, West Texas Intermediate October futures settled at $70.56/barrel, from $70.46/bbl on Sep. 14.

Brent futures for November delivery settled at $74.36/bbl on the CME on Sep. 21, from $73.60/bbl on Sep. 14.

Light Louisiana Sweet crude wholesale spot prices were hovering at $71.11/bbl on Sep. 20, from $72.29/bbl on Sep. 13, 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.