U.S. Base Oil Price Report


Cross Oil announced a price increase for naphthenic base oils this week, while on the paraffinic side, suppliers were monitoring market developments and evaluating whether any price adjustments would be issued, following Chevron’s posted price increase last week. While supply levels have improved compared to earlier in the year – when inventories were almost non-existent–the market has not yet reached balanced conditions, and some segments remained fairly tight, while others were somewhat long.

Cross Oil communicated that the company would be increasing prices on all grades of naphthenic base oil by 20 cents per gallon, effective Nov. 4. “This increase is being driven by market factors including increases in crude oil, natural gas, and continued inflationary pressure on other inputs,” the company explained. It also noted that it would limit orders to contract quantities during the transitional period and may limit sales based on available inventory.

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Steady demand against slim inventories were straining supply and exerted pressure on price indications, sources noted. Most recently, a majority of naphthenic suppliers had increased prices between late September and early October, with Cross Oil, Calumet, San Joaquin Refining and Ergon raising prices by 25 cents per gallon across the board.

Ongoing and imminent maintenance programs were expected to tighten naphthenic supply further, 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 was expected to begin a planned maintenance event at its naphthenic refinery in Vicksburg, Mississippi, on Oct. 23, lasting between seven and 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.

On the paraffinic base oils front, similar fundamentals to those observed for naphthenic base stocks dominated the scene. Last week, Chevron communicated posted price increases of 15 cents per gallon for its API Group II 100R cut, 12 cents/gal for its 220R base oil and 20 cents/gal for its 600R cut, effective Oct. 19. The more significant markup likely reflected the tighter conditions of the heavy-viscosity grades. The adjustments were thought to be driven by firm crude oil and feedstock prices, squeezed margins, snug base oil supply, and mounting transportation, labor and energy costs.

There were also reports that Chevron would be slowing down production of base oils while the company completed maintenance work at its Pascagoula, Mississippi, refinery in the first quarter of 2022, which could possibly lead to a tightening of Group II supplies in the United States early next year. The production information could not be confirmed with the producer directly. The Pascagoula plant has a capacity of 25,000 barrels per day of Group II base oils.

While availability of most paraffinic grades has improved, the light-viscosity grades were generally more easily obtained than their heavier counterparts, leading to downward pressure on spot indications for the light grades over the last few weeks. A Group II producer was heard to have granted selective discounts on a number of light grades so as to reduce inventory, according to sources, and others may choose to do the same as demand tends to soften towards the end of the year.

Meanwhile, demand for most grades was described as healthy and producers were therefore not expecting a significant lengthening of supply until the end of the first quarter in 2022 at the earliest. However, a number of turnarounds in the first half of the year could result in continuing tightness.

Producers have also sold several light grade cargoes in the spot export market, which eliminated a supply overhang within the domestic market. A number of cargoes were heard booked into Mexico, India, South America and the Middle East.

Lubricant manufacturers continued to face the challenge of not being able to obtain certain base oil grades, as well as additives and other chemicals needed for the manufacture of finished products. Recent plant outages, together with supply chain disruptions, labor shortages and transportation issues were hampering the smooth operation of many blending facilities. Experts did not expect the situation to improve any time soon. “Things are going to get worse before they get better, especially with the holidays approaching,” a source commented.

Aside from steep base oil prices, blenders were also facing other raw material increases, with a major additive supplier communicating a general lubricant additive price increase of up to 8%, effective Nov. 1. The hike was thought to be driven by the climbing prices of raw materials and transportation.

Lubricant manufacturers have reacted to the ongoing price pressure by implementing price increases of their own. In all, there have been seven rounds of lubricant price increases since the beginning of the year, given escalating production costs and other factors such as a shortage of certain components.

Due to similar fundamentals, a grease manufacturer has also announced a price increase of up to 9% on finished greases, with an effective date of Nov. 8.

Halloween trick-or-treaters are not the only ones getting spooked this week. Market participants kept an anxious eye on crude oil prices, which have been on a steep incline. Crude futures approached new multi-year highs on Tuesday, catapulted by a global supply shortage and robust demand in the U.S., the world’s biggest consumer. Crude oil levels in Cushing, Oklahoma, continue to dwindle, with inventories hitting a three-year low last week. 

On Oct. 26, West Texas Intermediate December futures settled at $84.65/barrel, from $82.96/barrel for November futures on Oct. 19.

Brent futures for December delivery settled at $86.40/barrel on the CME on Oct. 26, compared to $85.08/bbl on Oct. 19.

Light Louisiana Sweet crude wholesale spot prices were hovering at $84.94/barrel on Oct. 25 and had settled at $83.72/bbl on Oct. 18, 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.