U.S. Base Oil Price Report

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Ongoing tight supply conditions, coupled with firming crude oil and feedstock prices, placed upward pressure on base oils, extending a trend that already resulted in posted price increases in mid-January.

Downstream, additional price markups for finished products were expected to be implemented later this month and in early March.

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Back in January, a round of posted price increases ensued in base oil values increasing by 40 cents per gallon, although Motiva raised its prices by 23, 28 and 30 cents/gal and Chevron lifted its postings by 39, 40 and 42 cents/gal.

On the naphthenic base oils front, Cross Oil, Ergon, Calumet and San Joaquin Refining implemented 40 cents/gal markups with effective dates between Jan. 20 and Jan. 26.

The steeper base oil values, together with mounting production and transportation costs, drove finished lubricant, grease and additive manufacturers to either seek an increase as well – slated to go into effect in the second half of February and early March, or revise the amount of an increase that was slated to go into effect from late January through early February. Some manufacturers recalled the first increase and will only implement an increase in February or March. The increases ranged between 3% and 30%, depending on whether they reflected a fresh increase or a combined increase.

For example, Safety-Kleen has recalled its first increase, which was slated for Jan. 18 implementation, and instead will be lifting prices by 15-30% on Feb. 10.

Chemlube International implemented price markups of 8-12% on Jan. 18 and will be lifting prices again by 9-12% on Feb. 25.

Omni Specialty Packaging announced a price increase effective March 1, which will lift prices for all lubricants, chemicals and greases up to 8%. Previously, Omni had communicated an increase of 10-15%, effective Jan. 22.  

Warren Oil was heard to be seeking an increase of up to 10%, effective March 1. The previous increase raised product prices up to 15%, effective Jan. 14.

The tight base oil supply conditions were not anticipated to improve any time soon, because demand was deemed steady and a number of turnarounds have started this month. A few refineries were still running at reduced operating rates due to last year’s slump in demand for fuels and distillates brought about by the coronavirus pandemic.

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. 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. Both producers will be meeting contract commitments during the turnarounds, but did not anticipate extra availability for some time.

Buyers that typically seek spot shipments from these producers have turned to other suppliers for cargoes, but most producers report sold-out positions. A couple of Group II producers were heard to have a limited amount of spot availability, but were expected to ship these barrels to India or Latin America. There are rumblings of Middle East Group I cargoes being offered into Latin America as well, but it could not be confirmed whether the numbers would be workable.

Brazil has attracted more U.S. exports over the last year, particularly as local production has slowed down, while lubricant manufacturing activities picked up during the second half of the year, once pandemic-related restrictions had been lifted.

A couple of United States cargoes have reportedly been finalized for shipment to India this month. Some parcels of light grades were also expected to move to Mexico to be used for fuel blending.

Imported Group III supplies have been strained as well, given healthy demand, upcoming turnarounds in Asia and ongoing reduced operating rates at a Middle East unit due to feedstock supply issues, according to sources.

Given the current supply tightness, a number of base stock buyers who typically rely on spot shipments have opted for securing product under contract for the next several months to avoid potential product shortages and rising prices.

On the naphthenic side, similar conditions reigned in that few producers had extra availability. An ongoing turnaround and upcoming maintenance at two plants were exacerbating the supply constraints.

San Joaquin Refining has started annual maintenance at its Bakersfield, California, refinery. The unit was expected to 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. The producer was building inventories ahead of the turnaround and limited extra availability was expected.

There were rumblings that Ergon would be taking its naphthenic base oil plant off line for maintenance in April, but this could not be confirmed.

The naphthenic base oils segment experienced healthy consumption, both on the domestic and export fronts. Additionally, some blenders were utilizing naphthenic grades in certain blending applications in lieu of paraffinic oils, boosting consumption of pale oils.

Upstream, crude oil futures rose sharply, with West Texas Intermediate trading above $58 per barrel and Brent rising above $60/bbl per barrel for the first time in more than a year as stockpiles shrunk, OPEC+ members continued to produce within their agreed quotas, and the demand outlook improved on the back of COVID-19 vaccination campaigns.

China has been the target of additional crude oil shipments as the nation increased fuel consumption and manufacturing activity has picked up the pace, although a temporary slowdown was expected ahead of the Lunar New Year holidays starting Feb. 11.

On Tuesday, Feb. 9, March WTI futures settled at $58.36 per barrel on the CME/Nymex, and had closed at $54.76/bbl on Feb. 2.

Brent futures for April delivery settled at $61.09/bbl on the CME on Feb. 9, from $57.46/bbl on Feb. 2.

Light Louisiana Sweet crude wholesale spot prices were posted at $59.75/bbl on Feb. 8 and had closed at $55.55/bbl on Feb. 1, 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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