U.S. Base Oil Price Report


With a flurry of turnarounds currently underway, and a couple more slated in March, there appeared to be little relief in sight for the current tight base oil supply conditions in the United States.

Calumet has started a routine turnaround at its API Group I and Group II unit in Shreveport, Louisiana, which is expected to be completed by the end of the month. The producer plans to meet all contract commitments during the shutdown, and is not placing customers on allocation, but will be unable to entertain spot business opportunities, according to a company source.

HollyFrontier has also begun a turnaround at its Group I plant in Tulsa, Oklahoma. The plant was expected to remain off-line for approximately thirty days. The producer has built inventories to cover contract obligations, but has no additional availability to offer for spot transactions and has limited bright stock shipments. The supplier did not anticipate improved availability until April.

As a result of these maintenance programs, and the fact that a major producer was shipping some of its U.S. output to its operations in Europe and Asia, there was little Group I available outside of volumes agreed under contract. In addition, another Group I producer was heard to continue running its plant at trimmed production rates, adding to the market tightness.

A few blenders have resorted to securing Group II base oils to replace Group I cuts, but Group II grades are not particularly easy to locate either. A majority of Group II producers were heard to be sold out. One producer was understood to have a couple of spot cargoes of light-viscosity grades, but they are likely to move to India, where they were expected to fetch higher prices, according to sources. The buying interest from India was evidenced in a number of shipping inquiries to move product from the U.S. Gulf to Indian ports this month.

Group III grades were equally snug within the U.S. as consumption was robust and reduced production at a Middle East plant resulted in less product moving to the U.S. The producer was heard to have throttled back production due to feedstock supply problems.

However, other Middle East suppliers continued to ship product regularly and have in fact increased volumes sold to U.S. buyers in recent weeks. Group III prices have seen a steady rise, and no molecules were sold below $3.35 per gallon, particularly in the case of the 4 centiStoke cut, sources said.

Nevertheless, the tightest grade remained Group I bright stock – a cut that is difficult to replace in many applications. Market players said that extra barrels of bright stock were extremely hard to find – not only in the United States, but in Asia, the Middle East and Europe too.

Naphthenic base oil producer Ergon produces an alternate bright stock as well, but the company was heard to have scheduled a plant turnaround in April, and its supply of bright stock might be limited, too. This could not be confirmed with the producer directly, however.

Also on the naphthenic side, San Joaquin Refining has started annual maintenance at its Bakersfield, California, refinery. The unit will be off-line from approximately Feb. 1 to Feb. 15, and customers were likely to be on allocation from mid-January through the end of February. The producer had prepared inventories ahead of the turnaround to meet contract commitments.

Cross Oil’s unit in Smackover, Arkansas, was anticipated to be taken off line in March for a three-week turnaround, and this could exacerbate the snug supply situation for pale oils as limited extra availability was expected.

The naphthenic oils segment remained constrained because of healthy domestic consumption and lively demand for exports into South America, where heavy naphthenic grades were utilized in certain blending applications instead of paraffinic oils.

The strained supply and demand balance offered support to the late January round of price increases announced for both paraffinic and naphthenic base oils. Suppliers said that the markups had been implemented in full, despite the fact that at least one producer had nominated a lower increase amount than the 40 cents per gallon sought by a vast majority of suppliers, and this had generated some resistance from buyers.

A few suppliers acknowledged that the increase and the effects of the coronavirus pandemic had placed a bit of a damper on market activity, as demand for finished lubricants was tenuous in some areas of the country due to pandemic-related lockdowns and reduced mobility of the population.

Finished lubricant producers said that price increases between 8% and 15%, which were proposed in response to base oil and production increases in December, were in the process of being implemented. However, given the most recent round of base oil price increases, lubricant suppliers have issued additional price increase nominations to offset the steeper raw material values. Finished products manufacturers have either adjusted up the original increase amounts to between 15% and 30%, or are implementing a second increase of 8% to 15% in late February. More details about the February adjustments were anticipated to emerge in the coming week, as additional manufacturers joined the ranks of those seeking increases.

Upstream, crude oil futures rose sharply on Monday and traded at one-year highs above $55 per barrel, buoyed by hopes of a demand recovery and expectations that the oil production curbs by OPEC+ and its leader Saudi Arabia would tighten the market in the first quarter. Saudi Arabia promised to reduce its crude oil production by an additional 1 million barrels per day beyond the quota stipulated under an OPEC+ agreement. Oil prices climbed by 8 percent in January and began the month of February on an upward trend, too.

On Tuesday, February 2, March WTI futures settled at $54.76 per barrel on the CME/Nymex, and had closed at $52.61/bbl for February futures on Jan. 26.

Brent futures for April delivery settled at $57.46/bbl on the CME on Feb. 2, from $55.91/bbl on Jan. 26.

Light Louisiana Sweet crude wholesale spot prices were posted at $55.55/bbl on Feb. 1 and had closed at $54.78/bbl on Jan. 25, 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.

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