Last week’s posted price increases by a paraffinic and a naphthenic base oil producer triggered an avalanche of price markups on both sides of the market, as other suppliers communicated their own adjustments in rapid succession.
Last week, ExxonMobil communicated a posted price increase of 40 cents per gallon for all of its API Group I, II and II+ grades, scheduled to go into effect on January 20, according to reports. The price table below reflects the revised prices this week given the effective date of the increase.
Chevron stepped out with an increase announcement not long after, indicating that it would raise its Group II 100R grade by 40 cents/gal, its 220R grade by 39 cents/gal and its 600R grade by 42 cents/gal, effective Jan. 20, to reflect current market conditions, the company said.
Excel Paralubes communicated a 40 cent/gal price increase for its Group II Pure Performance 70N, 110N, 225N and 600N base oils, effective Jan. 21.
Along similar lines, Phillips 66 will lift the posted price of its Ultra-S2, S3, S4 and S8 base oils by 40 cents/gal as of Jan. 21.
HollyFrontier informed its customers that the company was increasing its Group I postings by 40 cents/gal across the board, effective Jan. 20.
Similarly, Petro-Canada marked up its Group II, II+ and III base oils by 40 cents/gal for all viscosity grades as of Jan. 20.
Motiva raised its Group II 100N by 23 cents/gal, its 220N by 28 cents/gal and its 600N by 23 cents/gal. The producer also lifted its Group III 4cSt and 6 cSt base oils by 30 cents/gal, all with an effective date of Jan. 15.
Calumet notified its customers that the company was raising both paraffinic and naphthenic prices by 40 cents/gal across the board, with all the increases going into effect on Jan. 20.
SK Americas will be moving up all Group II+ and Group III postings by 40 cents/gal, effective Jan. 25.
Paulsboro Refining will raise its Group I prices by 40 cents/gal, effective Jan. 25.
On the rerefining front, Avista Oil announced a 30 cent/gal price increase on both its ESR 50 GRII+ and its ESR T5 GRIII base oils, effective Jan. 18. The company explained that the price change was due to the recent round of base oil increases by major producers, high demand, and reduced inventories stemming from hurricane-related production issues in 2020.
Safety-Kleen will increase its Group II+ posted prices by 40 cents/gallon on the 120-vis grade and 40 cents/gal also on the 220/240-vis grade, effective Jan. 20.
On the naphthenic side, tight supply together with steeper crude oil and feedstock values and increased transportation and other production-related costs led Cross Oil to communicate a price increase last week for all of its naphthenic base oils of 40 cents per gallon, effective Jan. 20.
Ergon announced an increase in pricing of naphthenic oils in the North American market by 40 cents/gal, effective Jan. 22. The increase will apply to all viscosities.
San Joaquin Refining will raise its naphthenic base oils by 40 cents/gal, with an effective date of Jan. 26. The refiner will be shutting down its unit for annual maintenance from approximately Feb. 1 to Feb. 15 and was expected to be on allocation from this week through the end of Feb.
Cross Oil’s unit in Smackover, Arkansas, was also anticipated to be taken off line in March for a turnaround and this could exacerbate the tight supply situation for pale oils as limited extra availability was expected.
On the paraffinic side, spot availability was also said to be strained, although at least one Group II producer was heard to have some cargoes for spot transactions, according to sources.
Many refineries were still running at trimmed production rates, contributing to the current tightness. The rates vary by company, but 75-82% would be a typical crude oil charge rate as a result of COVID-19, a source explained, underscoring that jet fuel demand was particularly weak and refiners have therefore had to adjust run rates to avoid a build-up of fuels and distillates. This resulted in fewer base oil molecules being produced.
Sources also said that refining profits have been lean in recent months and current market conditions were forcing producers to try to improve margins for certain products like base oils, to keep plants from closing.
At the same time, finished lubricants and additive manufacturers noted that raw materials such as base oils continued to climb and it was difficult to absorb the higher costs, or transfer them down the supply chain, particularly when demand remained vulnerable. Lubricant price increases prompted by base oil hikes, among other rising costs, in November and December were just now starting to be implemented, sources said, and it was unclear whether another round would be initiated to reflect the January markups.
Increases of between 8% and 15% were expected to be implemented in the second half of January and first half of February for finished lubricants, greases and additives. A few suppliers acknowledged that the usual rush to purchase lubricants to beat the increases had failed to materialize this time around, but this came as no surprise given the subdued conditions in some parts of the country because of the increasing number of infections and extended lockdowns.
Activity on the export front has been slightly muted. Buying appetite from India and Brazil was healthy, but the number of shipments moving from the United States has fallen compared to the third quarter of last year as producers were focusing on meeting domestic demand and spot supply was limited.
Mexican buyers were also showing interest in U.S. base oil barrels, but the pandemic and current economic situation, together with increased base stock prices at the border were placing a damper on demand, sources said. However, there were few alternatives to U.S. product for Mexican consumers as the local producer, Pemex, was not manufacturing much product, sources added.
Upstream, crude oil futures inched up in early trading on Tuesday, but slipped on ongoing concerns about the effect on global demand of the coronavirus pandemic and the slowdown of most of the world’s economies – with the exception perhaps of China. The International Energy Agency cut its crude oil demand outlook for this year by 300,000 barrels per day to 5.5 million b/d, and forecast demand to total 96.6 million b/d in its latest crude oil report. The organization also took into account the rollout of coronavirus vaccination campaigns, which should lead to improved fuel demand.
On Tuesday, Jan. 19, February WTI futures settled at $52.98 per barrel on the CME/Nymex, and had closed at $53.21/bbl on Jan. 12.
Brent futures for March delivery settled at $55.90/bbl on the CME on Jan. 19, from $56.58/bbl on Jan. 12.
Light Louisiana Sweet crude wholesale spot prices were posted at $55.30/bbl on Jan. 15 and had closed at $54.45/bbl on Jan. 11, according to the Energy Information Administration. No trading took place on Jan. 18 due to the Martin Luther King Jr. holiday.
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.