U.S. Base Oil Price Report

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The United States base oil market was jolted out of its fairly placid state by price increase announcements this week. According to reports, ExxonMobil communicated a posted price increase driven by tight supply and rising crude oil and feedstock prices. On the naphthenic side, Cross Oil also informed its customers of an upcoming price adjustment.

ExxonMobil’s initiative would raise all of its API Group I, II and II+ base oil grades by 40 cents per gallon across the board as of Jan. 20. The Price Table below will be revised next week when the increases go into effect.

Current market conditions had already triggered higher spot price expectations for the week, as very few cargoes were anticipated to be available for spot business this month.

A majority of refineries appeared to be running at reduced rates, although there was talk that once fuel demand picked up in earnest after the coronavirus pandemic is contained, and fewer mobility restrictions are implemented, refiners would ramp up production. However, crude oil values have also increased, squeezing margins for many producers.

Base oil suppliers said they had seen a steady stream of orders, although the pace seemed to be slower than in December, which was to be expected in the first few days of the year.

The API Group I segment seemed to be the tightest, as demand for heavy viscosity grades and bright stock continued to be healthy and a couple of producers were preparing for turnarounds in February.

Calumet will be taking its Shreveport, Louisiana, Group I and Group II plant off-line for a routine turnaround, and HollyFrontier will also be completing a one-month turnaround at its Tulsa, Oklahoma, Group I plant.

The two producers were building inventories to cover requirements during the shutdowns, and were not offering spot cargoes. As a result, spot supply in this segment was expected to remain limited beyond February. “Bright stock seems to be the tightest and will remain so going into April at least,” a source predicted.

Buying interest from Mexico was described as robust, but there were not many cargoes available for export. While there had been a few hiccups and confusion at the border involving base oils moving to Mexico due to the implementation of stricter regulations on petrochemical imports, the situation has improved. The new rules do not apply to imports of lubricants and base oils. “We hear that shipments are back to normal, but supply is tight,” a source said, while another mentioned that even a large refiner who typically has extra availability was not offering much product into Mexico because it was shipping base stocks to Singapore to cover an extended outage at one of its plants.

Sources also explained that traders who were able to lay their hands on spot cargoes preferred to take product into India and South America due to better returns.

Spot supply in the Group II segment appeared to be equally strained, with only a couple of parcels heard to have been concluded for shipment to India this month, and export price ideas edging up week on week.

While there had been a global glut of Group III products at the end of 2019, the situation has changed significantly, with all Group III grades characterized as snug, and sizeable parcels of the 4 cSt grade particularly difficult to locate. This has resulted in climbing price indications in most regions, with spot prices in the U.S. heard to be hovering at $3-$3.15 per gallon for the 4 cSt cut and at $3.01-$3.17/gal for the 6 cSt and 8 cSt cuts, although higher prices at around $3.20/gal and slightly above were also heard bandied about for all Group III grades this week. “The first quarter will definitely be tight for Group III,” a source commented, adding that the potential containment of the pandemic and turnarounds in other regions such as Asia and the Middle East would determine conditions moving forward.

On the naphthenic base oils front, similarly tight fundamentals were reported, and this, together with higher crude oil and feedstock values and increasing production costs were placing pressure on prices.

These conditions led Cross Oil to communicate a price increase for all of its bulk, naphthenic base oils of 40 cents per gallon, effective Jan. 20. No other revisions were heard by the time this report went to press.

Upcoming turnarounds at San Joaquin Refining’s refinery in Bakersfield, California, in February and Cross Oil’s unit in Smackover, Arkansas, in March were anticipated to exacerbate the lack of extra availability.

Most finished lubricant, grease and additive manufacturers have announced increases of between 8% and 15% which were expected to go into the effect in the second half of January and first half of February.

Upstream, crude oil futures jumped over the $50 per barrel mark on surprising news last week that Saudi Arabia would be cutting crude output, fanning optimism for troubled U.S. shale producers. The higher oil prices have provided some incentive for U.S. production, with a seventh straight weekly increase in the number of active U.S. oil drilling rigs.

Crude futures have gradually moved up since they plunged to negative values in April last year due to a slump in demand caused by the pandemic.

On Tuesday, January 12, February WTI futures settled at $53.21 per barrel on the CME/Nymex, and had closed at $49.93/bbl on Jan. 5.

Brent futures for March delivery settled at $56.58/bbl on the CME on Jan. 12, from $53.60/bbl on Jan. 5.

Light Louisiana Sweet crude wholesale spot prices were posted at $54.45/bbl on Jan. 11 and had closed at $49.67/bbl on Jan. 4, according to the Energy Information Administration.

Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.

Posted Paraffinic Base Oil Prices

January 13, 2021

(Prices are FOB basis, in U.S. dollars per gallon and U.S. dollars per metric ton).

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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