U.S. Base Oil Price Report

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Two United States base oil producers declared force majeure, following unplanned shutdowns due to extreme winter weather conditions, power and water supply outages, and transportation disruptions in many Southern states. Additionally, a number of suppliers joined the ranks of those producers who had communicated posted price increases last week.

According to reports, Motiva and ExxonMobil declared force majeure on base oil supplies as both producers were forced to shut down their refineries in Texas, following a cold blast that brought sub-zero temperatures, causing the power to go out and water and gas lines to freeze in large parts of the state.

Motiva informed its customers that due to the severe weather and the unprecedented freezing temperatures, the company had shut down its Port Arthur manufacturing complex. Logistics were also affected by the weather conditions. Consequently, the company declared force majeure on all grades manufactured at the Port Arthur facilities on Feb. 15. The company produces API Group II and Group III base oils at the refinery.

Motiva was heard to have restarted its Port Arthur refinery on Feb. 22. The cold snap had caused an unexpected shutdown of process units from steam loss, according to reports, and this issue had been resolved. It was not clear when the company would be restarting the base oils unit.

Similarly, the winter storm caused ExxonMobil’s Baytown, Texas, refinery, to shut down last week and the company was heard to be unable to produce its EHC 45, EHC 65, Americas Core 600 and Americas Core 2500 grades. As a result, ExxonMobil declared an event of force majeure for those grades.

It was also heard that ExxonMobil began the restart process at the refinery on Feb. 22, given that power had been restored to the facilities over the weekend, sources familiar with the company’s operations said. However, the base oil unit was not anticipated to resume for several weeks. During the shutdown, the company had redirected the supply of its own generators to the state’s power grid to help with the power outages, sources said. The company’s refinery in Baton Rouge, Louisiana, was not affected by the weather system.

The shutdown and force majeure information could not be confirmed with the producers directly because Motiva and ExxonMobil do not comment on the status of their operations.

Paulsboro has also limited its sales to ratable domestic customers, but has not declared force majeure on product supply.

The winter storm’s effects were compared to those of Hurricane Harvey in 2017, which also knocked out a significant portion of the country’s refining capacity. However, sources said that in this case, the frozen natural gas and water lines posed additional challenges to a smooth restart process. The state of Texas made restoring power and water supply to residents a priority.

The cold blast also caused logistical and transportation disruptions, not only in Texas and other Southern states, but throughout the Midwest as well.

Also this week, several producers announced posted prices increases, driven by extremely tight supply conditions, rising crude oil and feedstock prices and steady demand. These adjustments followed the onset of a fresh round of price hikes that a few suppliers had started last week.

Petro-Canada raised its Group II and Group II+ base oils by 30 cents/gal, effective Feb. 19. The producer has not adjusted Group III prices.

Calumet announced a price increase of 30 cents per gallon on all of its API Group I and II paraffinic base oils last week, which was implemented on February 23. The producer also adjusted up its naphthenic oils.

Paulsboro will be adjusting up its Group I base oils by 30 cents/gal on Feb. 24.

Excel Paralubes will be increasing all of its Group II prices by 30 cents/gal on Feb. 26.

Phillips 66 communicated a price increase of 30 cents/gal for its Group II+ and Group III base oils, with an effective date of Feb. 26.

Safety-Kleen increased its Group II+ 120-vis and 220/240-vis grades by 30 cents/gal on Feb. 19.

Avista Oil raised the price of its Group II+ and Group III base oils by 30 cents/gal on Feb. 22.

Last week, sources reported that ExxonMobil had implemented a posted price increase of 30 cents per gallon on all of its Group I, Group II and Group II+ base stocks, which went into effect on Feb. 19.

Chevron increased Group II base oils by 25 cents/gal across the board on Feb. 17.

HollyFrontier also lifted the posted price of its Group I base oils by 30 cents/gal on Feb. 19.

On the naphthenic front, Ergon announced a 30 cents/gal increase for its naphthenic base oils, which will go into effect in the North American market on March 1. The increase will apply to all viscosities, the company said.

Ergon had also issued a statement on Feb. 17 to inform customers that “the winter storm that has blanketed most of the southern United States has caused delays in product delivery via truck and rail from Ergon’s naphthenic refinery in Vicksburg, Mississippi.” The company’s management was monitoring conditions and was hoping to return delivery operations to normal as soon as possible.

As mentioned above, Calumet will also be increasing all of its naphthenic base oils by 30 cents/gal on Feb. 23.

Last week, Cross Oil communicated an increase for its naphthenic oils of 30 cents/gal, effective Feb. 19. The adjustment was necessary to offset the rising price of naphthenic crudes, refinery feedstocks and in-bound transportation, according to a company source. A snug supply and demand balance offered additional support to the increase, sources said.

Both paraffinic and naphthenic producers said they had received numerous calls from buyers looking for product, in particular Group I bright stock and the heavy-viscosity grades. “We have been swamped with calls from people trying to find base oils over the last few days,” a seller noted. However, most suppliers were heard to be sold out and very few barrels were available for spot business. A majority of producers were focusing on domestic sales and did not have much material to offer for export.

Aside from the unexpected shutdowns caused by the extreme weather conditions in much of the U.S., a couple of routine turnarounds were expected to be wrapped up in the next few days and one was anticipated to commence in the next few days.

Calumet was scheduled to complete a routine turnaround at its Group I and Group II unit in Shreveport, Louisiana, at the end of the month. There were reports that the restart may have been pushed back by a few days, but this could not be confirmed.

HollyFrontier’s Group I plant in Tulsa, Oklahoma, is also undergoing a thirty-day turnaround, with operations expected to restart in the next few days. The restart has been delayed slightly from its original date, market sources said.

San Joaquin Refining was expected to complete annual maintenance at its Bakersfield, California, refinery late last week. Customers had been placed on allocation from mid-January through the end of February due to the turnaround, despite the fact that the producer had prepared inventories to fulfill contract commitments during the outage.

Cross Oil is planning to take its naphthenic base oil plant in Smackover, Arkansas, off-line for a 20-day maintenance program on Feb. 26, but expects to be able to meet all of its contractual obligations during the turnaround.

The latest increases have placed additional pressure on blenders and additive manufacturers, who faced difficulties in offsetting the December, January and February rounds of base oil price markups. A number of suppliers have revised the amount of the announced increases, some have issued a second increase, and others recalled the first increase and will only implement a higher markup in late February and March. The increases ranged between 3% and 30%.

Now many lubricant manufacturers were also dealing with base oil shortages, drained inventories, and the possibility of having to reduce their output of finished lubricants. A few blenders in Texas and other locations in the South had also shut down operations due to sub-zero temperatures and power outages last week.

Upstream, crude oil futures rose as consumption seemed to be outpacing supply and continuing refinery outages in the U.S. pressured prices up, although some units were gradually resuming operations. Crude oil stored at sea dropped to an 11-month low last week, reflecting declining supply levels.

On Tuesday, Feb. 23, April WTI futures settled at $61.67 per barrel on the CME/Nymex, and had closed at $60.05/bbl on Feb. 16.

Brent futures for April delivery settled at $65.37/bbl on the CME on Feb. 23, from $63.35/bbl on Feb. 16.

Light Louisiana Sweet crude wholesale spot prices were hovering at $64.37/bbl on Feb. 22 and had closed at $61.55/bbl on Feb. 12, according to the Energy Information Administration.

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

Posted Paraffinic Base Oil Prices

February 24, 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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