A number of additional price hikes surfaced during the week, completing the round of markups that started in mid-February and had resulted in most base oil grades moving up by 25 to 30 cents per gallon. The increases were driven by extremely tight market conditions on the back of unplanned production outages and reduced refinery run rates, higher crude oil and feedstock prices, and steady demand.
Petro-Canada had already adjusted its Group II and II+ grades, but the producer nominated an increase of 30 cents/gal for its Group III cuts this week, with the adjustment going into effect on March 2.
According to sources, Motiva communicated a slightly higher increase of 40 cents/gal on its Group II aramcoPRIMA 100 and 220-vis grades and 45 cents/gal on its aramcoPRIMA 600 grade this week. Its Group III aramcoULTRA 4 and 6 cuts will be raised by 40 cents/gal. All of the increases will go into effect on March 3.
During the previous two weeks, a vast majority of paraffinic base oil producers had announced increases of 25 cents/gal to 30 cents/gal, implemented between February 19 and Feb. 26.
On the naphthenic front, San Joaquin Refining increased the price of its base oils by 30 cents/gal on March 1 due to “changing market conditions and increased costs,” the company explained.
Previously, other pale oil producers had already implemented price hikes. Cross Oil had communicated an increase for its naphthenic oils of 30 cents/gal, effective Feb. 19.
Calumet had also lifted the price of all of its naphthenic base oils by 30 cents/gal on Feb. 23.
Ergon implemented a 30 cents/gal increase for its naphthenic base oils on March 1. The producer had also issued a statement on Feb. 17 to inform customers that the winter storm had caused delays in product delivery via truck and rail from its naphthenic refinery in Vicksburg, Mississippi, but sources said that logistics had improved since last week.
The price increases were triggered by the strained supply and demand balance that had been plaguing the market since the end of the third quarter of 2020. The situation was exacerbated by unplanned plant shutdowns due to freezing temperatures in much of the United States, but Texas in particular, and associated power, natural gas and water supply outages along the U.S. Gulf Coast.
According to reports, Motiva and ExxonMobil declared force majeure on base oil supplies as both producers were compelled to shut down their refineries in Texas, following the cold blast. Both producers were heard to have restarted their refineries, but it was still uncertain when the base oil units would restart and achieve full production, sources said.
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.
The dire supply situation has left many buyers scrambling to obtain base oils, with the heavy-viscosity grades and bright stock said to be the hardest to locate. The flow of U.S. product to Mexico has also weakened to a trickle, with blenders there facing difficulties in finding enough product for finished lubricant production and fuel blending. It was heard that Mexican buyers were hoping to secure European imports, but supply was snug in that region as well.
Aside from the unexpected shutdowns caused by the extreme weather conditions in much of the U.S. two weeks ago, a couple of routine turnarounds were expected to be wrapped up in the next couple of weeks and several were scheduled in March.
Calumet was heard to have extended a turnaround at its Group I and Group II unit in Shreveport, Louisiana, for one to two weeks, as the process had been interrupted by the adverse weather, but this could not be confirmed. Similarly, it was heard that the restart at HollyFrontier‘s Group I plant in Tulsa, Oklahoma, had been delayed from its original restart date, following a routine turnaround which began in early February.
Cross Oil took its naphthenic base oil plant in Smackover, Arkansas, off-line for a 20-day maintenance program on Feb. 25 – slightly ahead of time due to the weather disruptions, according to sources – but was anticipated to meet most of its contractual commitments during the turnaround.
A re-refiner was also scheduled to start a turnaround on March 8, but the shutdown was only expected to last four to five days. Another re-refiner was slated to perform a maintenance program next month.
Manufacturers of lubricants, additives, greases and other finished products faced the challenges of obtaining enough base stocks, chemicals and other raw materials to keep operations running, as many of their suppliers were located in Texas and other sites in the South where the plant shutdowns had taken place. Buyers that rely heavily on spot purchases of base oils were particularly affected, as very few spot volumes, if any, were being offered. Some of these finished product manufacturers had also been forced to shut down operations themselves due to sub-zero temperatures and power outages the week of Feb. 20.
Lubricant manufacturers were also finalizing the implementation of a couple of rounds of increases ranging 3% to 30% to offset the markups seen on the base oils side since last December.
The sustained rise in crude oil and feedstock prices was not helping either. Crude oil futures have been on an upward trek since the start of the year, but slumped on Tuesday on growing concerns that OPEC+ producers, who will be meeting on Thursday, may decide to increase output.
On Tuesday, March 2, April WTI futures settled at $59.75 per barrel on the CME/Nymex, and had closed at $61.67/bbl on Feb. 23.
Brent futures for May delivery settled at $62.70/bbl on the CME on March 2, from $65.37/bbl for April futures on Feb. 23.
Light Louisiana Sweet crude wholesale spot prices were hovering at $62.94/bbl on March 1 and had closed at $64.37/bbl on Feb. 22, 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.