U.S. Base Oil Price Report


Chevron communicated a posted price increase, breaking a seemingly long hiatus without any paraffinic base oil price adjustments, especially considering the almost monthly markups observed during the first half of the year.

Chevron informed its customers that effective Oct. 19, the company was raising the posted price of its API Group II 100R base oil by 15 cents per gallon, its 220R by 12 cents/gal and its 600R by 20 cents/gal to “reflect current market conditions.” Higher crude oil and feedstock prices, squeezed margins, tight base oil supply, and rising transportation, labor and energy costs were some of the factors thought to be driving the increase.

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A number of buyers said that supply of base oils was mixed, with some grades – namely the light-viscosity ones – appearing more readily available than some of the heavy-vis cuts. The situation also varied from supplier to supplier, with some of them reporting minimal availability and others noticing lengthening volumes of some grades. Base oil rerefiners also reported generally tight conditions, with one refinery heard to have undergone a brief maintenance shutdown.

Buyers had attended the Independent Lubricants Manufacturers Association’s meeting in Arizona about a week ago in hopes of securing cargoes for the next several months, but many conceded that the market was tighter than they had anticipated. “We talked to a lot of people at ILMA and the market is definitively shorter than I expected. I think this situation will not improve until late Q2 2022,” a source observed.

The snug supply situation may be exacerbated during the first part of next year, when several major base oil plants in the United States will be undergoing turnarounds, sources added. Some of the surplus volumes cropping up recently in the U.S. market have been booked to India and the Middle East. Many Group I and II light-grade supplies continued to move to Mexico as well.

Suppliers confirmed that overall, orders were still fairly strong across the board, although the spot market for light viscosity Group I and II grades have lengthened and prices have softened.

Spot prices for bright stock, which had steadily climbed during the first half of the year, have come down from their lofty levels. “It is all relative,” a source explained. “I would say the product is still tight overall, but there is some availability now and there was none in previous months. So, it makes sense that pricing would dip a bit.”

The Group III segment remained strained, with little extra availability observed in the U.S., but lengthening supply in Europe and Asia and export opportunities from these regions, together with steady imports from the Middle East, were expected to relieve some of the pressure.

Logistical and transportation issues continued to plague the base oil and lubricants supply system as well. A global shortage of certain raw materials such as additives was hampering the manufacturing of lubricants and other finished products, while a lack of truck drivers, railcars and vessel space were causing shipment delays.

“Logistics problems continue at all levels,” a source noted. “While our trucking [suppliers] have managed to get drivers and serve us pretty well, they now have difficulties getting normal maintenance and repair parts.”

Many ports were suffering from significant congestion as vessels were unable to load or unload goods. This was the case in most regions–from Asia to the United States. “About 200,000 – that’s how many shipping containers were backed up off the coast of Los Angeles as of yesterday as pandemic-related disruptions continue to affect various supply chains,” CNN.com reported on Oct. 19. The port of Los Angeles will be open 24 hours a day for the foreseeable future in an effort to relieve some of the congestion.

The automotive industry saw factory shutdowns and a shortage of new cars due to a lack of computer chips and other components. This was also having an impact on lubricant demand and prices, according to sources. “The world’s delicate supply chains are under extreme stress, and it’s jacking up prices for consumers and slowing the global economic recovery. Experts warn the supply chain disruptions will get worse before they get better,” Moody’s Analytics reported last week.

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

The naphthenic segment was anticipated to see continuing tightness due to healthy demand and a busy turnaround schedule over the next few months, although most producers planned to build inventories to cover requirements during the outages. 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 October 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 February 1.

Rising crude oil prices also placed pressure on base oil indications. Crude futures jumped on Tuesday, stoking analysts’ concerns that a supply crunch of electricity, coal and natural gas across the globe would be exacerbated by falling temperatures – a phenomenon particularly observed in China this week – driving prices to new highs.

On Oct. 19, West Texas Intermediate (WTI) November futures settled at $82.96/barrel, from $80.64/barrel on Oct. 12.

Brent futures for December delivery settled at $85.08/barrel on the CME on Oct. 19, compared to $83.42/bbl on Oct. 12.

Light Louisiana Sweet crude wholesale spot prices were hovering at $83.72/barrel on Oct. 18 and had settled at $81.05/bbl on Oct. 8, 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.