U.S. Base Oil Price Report

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Market fundamentals were largely stable, although spot prices for the light viscosities continued to be exposed to downward pressure as more base oils became available and producers began to rebuild stocks. The start of the last quarter also placed a slight damper on orders as buyers preferred to keep lean inventories ahead of Dec. 31. However, climbing crude oil prices offset some of the price pressure.

Numerous participants attended the Independent Lubricants Manufacturers Association meeting on Oct. 9-12 in Phoenix, Arizona, where many business discussions about upcoming product needs versus availability were heard to have taken place. Buyers seemed concerned about finding enough base stocks to cover their requirements in November and December.

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Despite the fact that most grades have become more accessible than during the previous three quarters, a few pockets of the market remained very tight and this supported current posted and spot prices, in particular for the high viscosity grades.

In the API Group I segment, the extreme tightness of the heavy grades and bright stock has begun to ease, but supply was not considered long by any means. The influx of imports from the Baltic and Europe has helped cover some of the most urgent requirements, particularly those coming from the export market, as many United States cargoes regularly make their way into the Mexican fuel extender segment.

The Group II sector has seen improved availability as well, even though this was the segment that had suffered the most serious impact from the production setbacks caused by a freezing winter storm back in February. Supply issues lingered into the third quarter and were expected to worsen during the hurricane season if severe weather were to affect plant operations once again.

While Hurricane Ida and Tropical Storm Nicholas pummeled the Texas, Louisiana and Mississippi coasts – where many base oil plants are located – most facilities weathered the storms fairly unscathed and output returned to normal levels swiftly.

Producers were also able to find a home for any extra cargoes in the export market, with several Group II parcels heard to have been booked for India and South America.

The Group III segment has also seen strained conditions for most of the year, and this sector was the most impacted by the logistical disruptions brought about by the recent storms as they caused flooding and widespread power outages. Ports, terminal and rail operations were affected by the weather-related issues and several Group III suppliers who use these facilities to distribute imports from Asia and the Middle East saw their operations interrupted for several days. However, most operations have been reestablished and were returning to normal levels.

Furthermore, with Group III supply lengthening in Asia, more cargoes may be freed up for export to the U.S., sources noted.

There have also been output disruptions at several chemical and additive plants, which have caused a shortage of raw materials for the manufacture of lubricants, automotive fluids and other finished products. Several manufacturers reported having to maintain customers on allocation because of reduced output, particularly of synthetic oils. Blenders have also implemented several price increases since the beginning of the year to offset seven rounds of base oil price hikes, climbing transportation and labor costs, and increases in raw materials such as packaging.

On the naphthenic base oils side, a majority of suppliers implemented price increases between late September and early October. Cross Oil, Calumet, San Joaquin Refining and Ergon increased prices by 25 cents per gallon across the board for naphthenic base oils between Sep. 21 and Oct. 1.

This segment of the market was anticipated to remain fairly snug due to healthy demand and a busy turnaround schedule over the next few months. Cross Oil recently completed a brief shutdown and a catalyst change at its Smackover, Arkansas, naphthenic base oils plant. Ergon has scheduled a planned maintenance event at its naphthenic refinery in Vicksburg, Mississippi, beginning Oct. 23 for seven to 16 days. Calumet has slated a turnaround that will last one to two weeks at its Princeton, Louisiana, plant in early November. Next year, San Joaquin Refining plans to start a three-week maintenance shutdown at its plant in Bakersfield, California, on Feb. 1.

Base oil participants kept an anxious eye on crude oil prices, as they have spiked over the last couple of weeks on concerns about an energy shortage in 2022. Crude oil futures hovered near three-year highs boosted by a rebound in global demand that was feeding fears about an oil and natural gas crunch as economies recovered from pandemic woes. The fact that the OPEC+ was planning to maintain oil output at current levels and only increase gradually over several months fueled these concerns.

On Oct. 12, West Texas Intermediate (WTI) November futures settled at $80.64/barrel, from $78.93/barrel on Oct. 5.

Brent futures for December delivery settled at $83.42/barrel on the CME on Oct. 12, compared to $82.56/bbl on Oct. 5.

Light Louisiana Sweet crude wholesale spot prices were hovering at $81.05/barrel on Oct. 8 and had settled at $79.03/bbl on Oct. 4, according to the Energy Information Administration (There was no trading on Oct. 11 due to the Indigenous People’s 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.