U.S. Base Oil Price Report

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The market returned to business following the Labor Day holiday on Monday to find that Motiva had communicated a posted price increase for its API Group II and III base oils on Sept. 4. The increase was thought to have been driven by a tighter supply scenario and firm feedstock prices over the last several weeks.

According to reports, Motiva notified its base oil customers that effective Sept. 7, the company’s Group II aramcoPRIMA 100 cut (105 vis) would be raised 15 cents per gallon; the aramcoPRIMA 220 vis would be lifted by 25 cents/gal, and the aramcoPRIMA 600 vis by 20 cents/gal. Both Group III grades (aramcoULTRA 4 and 6) were increased by 15 cents/gal. 

Given the holiday at the start of the week, participants had little time to react to the news of the increase. However, some sources speculated that the hike had been fueled by the reduced availability of base oils on the United States Gulf Coast, after Hurricane Laura put the Excel Paralubes plant temporarily out of commission on Aug. 25, and had also triggered brief shutdowns and reduced operating rates at other facilities situated along the coast.

The Excel Paralubes plant in Westlake, near Lake Charles, Louisiana, which is part of the Phillips 66 refinery and has capacity to produce 22,200 barrels per day of Group II base oils, was reported to remain off-line due to the impact of the hurricane.

While details of the current status of the plant were not released, participants said that it would not be surprising if the operators were to declare force majeure on base oil supply, as electric power to the facilities had not yet been restored. Furthermore, transportation issues caused by impassable roads and restrictions on railroad usage meant that the producer would be unable to ship product out for the time being.

Some market players expected the plant to be restarted soon, while others were of the opinion that the plant might remain down for two to three weeks, due to extensive damage to the electricity grid in the area. Local officials had estimated that it could take up to two months for power to be restored to certain locations affected by the storm.

Meanwhile, other plants that had either reduced run rates or shut down ahead of Laura, including Motiva and Calumet, were expected to have resumed normal production over the week. Motiva had not restarted its 40,300 barrels per day Group II and III base oil plant in Port Arthur, Texas, by last Thursday, Sept. 3, because of a general power outage, but the company has its own power supply and was anticipated to have restarted over the weekend, although this could not be confirmed. The producer was said to have padded inventories ahead of the hurricane season to cover any short-term output disruptions.

The U.S. Group II segment had already started to tighten, even before the storm-related shutdowns, as producers had exported significant spot volumes to various destinations in Asia, Europe and the Middle East between June and August. Export prices had steadily risen to reflect the healthy buying interest and reduced supply levels. A majority of producers have now withdrawn spot offers, according to sources.

Additionally, the snug conditions in the Group I segment have led some consumers to purchase Group II base oils as a substitute for those applications where this is possible. Bright stock, which is more difficult to replace, remains tight in all regions.

Back in early August, ExxonMobil was reported to have initiated a round of posted price increases of between 15 and 30 cents/gal, which was followed only by a couple of other producers. Those suppliers that had not raised prices at that time were likely to join the bandwagon this time, sources said.

However, some players wondered if a price increase would be accepted as crude oil and feedstock prices were on a downward trend – after hovering at fairly firm levels for several weeks – and demand was still deemed fragile in many downstream segments.

On the naphthenic base oils side, prices were reported as stable, supported by balanced-to-tight supplies, depending on the grade and relatively steady demand. Suppliers braced for the typical slowdown in the last quarter of the year, which was expected to be more pronounced than in years past due to the coronavirus pandemic and its dampening effect on downstream applications.

Upstream, crude oil futures tumbled to their lowest level in nearly three months on Tuesday, on concerns about a global oil demand recovery, news that Saudi Arabia had cut monthly prices for its supplies to Asia, and plans by OPEC to expand production, which meant adding barrels to an existing crude oil glut.

On Tuesday, Sept. 8, October WTI futures settled at $36.76 per barrel on the CME/Nymex and had closed at $42.76/bbl on Sept. 1.

Brent futures for November delivery closed at $39.78/bbl on the CME on Sept. 8, from $45.58/bbl for October futures on Sept. 1.

Light Louisiana Sweet crude wholesale spot prices settled at $42.19/bbl on Sept. 4 (there was no trading on Sept. 7 due to the Labor Day holiday) and had closed at $43.86/bbl on Aug. 31, according to the Energy Information Administration.

Vacuum gas oil (VGO) was trading at July WTI plus $6/bbl (or $42.76/bbl) on Tuesday, Sept. 8, according to OPIS/PetroChem Wire assessments.

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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