U.S. Base Oil Price Report

The dust appears to have settled after the latest round of posted price increases, and a more stable price scenario has emerged, which producers hope will encourage buyers to place orders.

However, sellers acknowledged that demand levels were still less robust than at the same time last year, and that supply was more than adequate to cover current requirements.

Between April 9 and May 9, a vast majority of producers implemented price hikes for API Group I, II, II+ and III base stocks, ranging 15 to 35 cents per gallon.

On the naphthenic front, Cross Oil lifted its pale oils by 12 and 15 cents/gal, depending on viscosity, on April 22. Ergon, Calumet and San Joaquin Refining notified customers of 20-cent increases between May 3 and May 9.

Finished lubricants, greases and additives also underwent markups in the realm of 5 to 8 percent, effective early May.

Suppliers believed that the recent implementation of price increases was not the only factor dampening demand - which typically peaks in the spring - but noted that economic and geopolitical uncertainties were also impacting buying appetite.

Much attention this week was focused on the ongoing trade conflict between the United States and China, which has resulted in yet another round of tariff increases on a large number of goods. The International Monetary Fund again warned that a full-blown trade war would weaken the global economy.

In 2017, the U.S. government launched an investigation into Chinese trade policies, and last year imposed three rounds of tariffs on billions of dollars worth of Chinese products, with Beijing retaliating in kind. Both countries agreed to a truce in December to continue negotiations, and after extensive trade talks, were expected to reach a deal before May 10.

However, the talks did not lead to an agreement, and the U.S. increased tariffs from 10 percent to 25 percent on $200 billion worth of Chinese products. Beijing retaliated on Monday with tariff hikes on $60 billion of U.S. exports, including chemicals, coal, vehicles, and medical equipment.

The base oil segment was already feeling the effects of the trade war due to last years tariff schedule. China had imported U.S. base stocks on a regular basis in the past, but import volumes have plummeted since last year. Finished lubricant manufacturers also said that their sales of U.S.-made products into China had decreased significantly, and some are switching to manufacturing goods with partners in China to maintain market share.

In other trade-related news, automakers expect President Donald Trump to delay a decision due May 18 on whether to impose steep tariffs on imported cars and auto parts on national security grounds as talks continue with the European Union and Japan, Reuters reported. Four auto executives who have spoken to administration officials say he is likely to extend the deadline for another six months, and may also announce a specific date to impose new duties if no deal is reached.

In terms of exports to Mexico, U.S. product shipments were expected to face increased delays at the Mexican border and added costs for the next few months as border controls were heard to be dealing with a surge in border crossings.

Upstream, crude oil futures rose as two pumping stations on a Saudi Aramco oil pipeline in Saudi Arabia were attacked by drones carrying explosives on Tuesday. The pipeline, which conveys oil from eastern Saudi Arabia to the port of Yanbu, was shut down to assess its condition, although it was not significantly damaged. Reports of the drone attack come a day after Saudi Arabia said that two of its oil tankers were sabotaged near the United Arab Emirates, while the U.A.E. said that a total of four vessels were attacked off its coast at the port of Fujairah.

On May 14, West Texas Intermediate April futures settled at $61.78 per barrel on the CME/Nymex, up 38 cents/bbl from $61.40/bbl on May 7.

Brent futures for July delivery closed at $71.24/bbl on the CME on May 14, and had settled at $69.88/bbl on May 7 for June futures.

Light Louisiana Sweet crude wholesale spot prices settled at $69.57/bbl on May 13, compared to $70/bbl on May 6, according to the Energy Information Administration.

Low sulfur vacuum gas oil was at June WTI plus $16.50/bbl ($77.54/bbl); high sulfur VGO was at crude plus $16/bbl ($77.04/bbl) on May 13. By comparison, low sulfur VGO was hovering at $79.25/bbl and high sulfur VGO at $78.50/bbl on May 6, according to data published by OPIS PetroChemWire.

Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase inExcel format.