Please note: This updated version of the April 28 report includes SK’s price increase.
A majority of base oil producers stepped out with price increase announcements this week. First out of the gate was Phillips 66, closely followed by ExxonMobil, Chevron, Calumet, HollyFrontier, Petro-Canada, Excel Paralubes, Paulsboro, SK and rerefiners Avista Oil and Safety-Kleen. On the naphthenic side, Cross Oil communicated a price increase that will go into effect in early May. The increases were driven by the extremely tight supply conditions, healthy demand and higher production costs, including crude oil, feedstocks and transportation.
Phillips 66 communicated a 40 cents per gallon posted price adjustment on its Ultra-S Group II+ and API Group III base oils, effective April 26.
Chevron notified its customers that the company would be increasing Group II posted pricing by 30 cents/gal, effective April 27, to reflect current market conditions.
According to reports, ExxonMobil intends to increase its Group I 100 and 150-vis grades by 15 cents/gal; its Group I 330 and 600 by 30 cents/gal and its bright stock by 40 cents/gal. The producer’s Group II EHC 65 grade will increase by 30 cents/gal and its Group II+ EHC 45 grade by 40 cents/gal, all with an effective date of April 30.
Calumet also announced a price increase on its paraffinic oils, effective April 30. The producer’s Group I 600-vis cut will be lifted by 30 cents/gal and its bright stock by 40 cents/gal; its Group II 75/80, 100, 150 and 325-vis grades will be raised by 30 cents/gal.
HollyFrontier will be increasing the price of its Group I SN 148-vis and lighter base oils by 15 cents/gal, its SN 250-SN 560 grades by 30 cents/gal and its SN 150 bright stock by 40 cents/gal, with an effective date of May 3.
Petro-Canada announced that it would be marking up posted prices for all viscosities of its Group II base oils by 30 cents/gal, its Group II+ base oils by 40 cents/gal and its Group III grades also by 40 cents/gal as of May 3.
Excel Paralubes informed its customers that the company would be lifting the price of its Group II Pure Performance 70N, 110N, 225N and 600N grades by 30 cents/gal, effective April 29.
Paulsboro will be increasing its Group I light grade base oils by 15 cents/gal, its mid- and heavy-viscosity grades by 30 cents/gal and its bright stock by 40 cents/gal as of May 5. The price table below will be adjusted to reflect these increases next week when they become effective.
SK Americas communicated a posted price increase of 40 cents/gal for the company’s Group II+ and Group III grades, effective May 1.
Avista Oil raised the posted price of its Group II+ and Group III base oils by 40 cents/gal, with an effective date of April 26. The adjustment was due to “higher feedstock costs, competing fuel prices for VGO, and firm market fundamentals, including high demand and tight supplies,” the producer explained.
Safety-Kleen will be increasing its Group II+ posted prices in all regions by 40 cents/gal on the 120-vis grade and 40 cents/gal on the 220/240-vis grade as well, effective May 1.
Finished lubricants, greases, additives and other product manufacturers said it had already been an uphill battle to offset the recent rounds of base oil price increases –there have been three since January – and even though they have announced increases of their own for late April/early May, they expected much resistance from consumers to any additional hikes.
A majority of finished product manufacturers had announced increases between 3% and 15% – depending on whether the suppliers had previously sought increases in the first half of April – to be implemented in late April and May. “The finished price increases and more are going through, [customers] think all this is unreal,” a source commented.
Base oil consumers were also concerned about potential base stock production outages during the hurricane season, which starts in June, and about the difficulty in locating extra product to pad inventories in preparation for possible shortages.
The strained supply and demand ratio has been plaguing the base oils market since the third quarter of last year, when a number of hurricanes forced plants along the United States Gulf Coast to shut down. More recently, freezing temperatures along a large swath of the U.S. caused power outages and structural damages at several refineries and petrochemical plants in mid-February. These unexpected shutdowns, together with concurrent turnarounds, exacerbated the already snug supply conditions.
Motiva and ExxonMobil were two of the producers who were forced to shut down operations in February and declare force majeure on base oil production. Both suppliers restarted their plants in March and were running well, sources said. One of the suppliers was heard to have lifted its force majeure and allocation on base oils last week. The producers did not comment on the status of their operations.
Buyers of Group I base oils appeared to be particularly affected by the limited supply. Producers were able to meet contractual requirements for the most part, but were unable to spare any spot barrels. Bright stock remained an elusive and pricey base stock, and consumers lamented the fact that it was a difficult cut to replace in certain applications.
The dearth of spot supply has resulted in a vastly reduced number of cargoes moving to markets such as India, Mexico and South America. Mexican buyers have been hit hard by the lack of base oil and additives supply in the U.S., sources said. Spot prices at Brownsville, Texas, a key trading hub for barrels moving into Mexico, have moved up steadily in recent weeks, but values were mostly notional because there was little product changing hands, source noted.
Calumet and HollyFrontier restarted their base oil plants in Shreveport, Louisiana, and Tulsa, Oklahoma, respectively, in early April, following planned turnarounds. The maintenance programs were originally expected to last one month, but were extended by nearly a second month due to damages caused by the severe winter storm in mid- February. Calumet produces both Group I and Group II base oils at its refinery, and HollyFrontier produces Group I grades.
Both producers have ramped up rates and were striving to attain full rates and meet contractual commitments. However, HollyFrontier’s bright stock production remained under force majeure and contract customers were on allocation. Neither one of the suppliers was able to offer spot supply for the time being, and did not expect to be able to have spot availability until late May or June, according to sources.
Ergon’s paraffinic Group I and Group II refinery in Newell, West Virginia, began a 30-day turnaround on April 9. The company hoped to manage product inventories so as to minimize supply disruptions during the turnaround period and restart process in early May.
Ergon communicated that on April 7, an unoccupied maintenance shop at the Ergon refinery in Newell had suffered damage from a fire. Local fire departments, together with Ergon’s fire brigade, were able to quickly extinguish the fire. There were no injuries, and no bulk chemicals or hydrocarbons were involved in the fire, the company said. Ergon also noted that the damage was contained and would have no impact to its operations or maintenance schedule.
Market sources also mentioned that Paulsboro had scheduled a 10-day turnaround at its Group I unit in Paulsboro, New Jersey, starting in mid-April.
Vertex Energy was expected have a brief shutdown at its plant in Ohio sometime in the second or third quarter of the year.
On the naphthenic base oils front, recent planned and unplanned turnarounds, trimmed run rates and healthy demand have also resulted in sparse availability and higher prices. Despite the fact that suppliers were doing their utmost to meet requirements, some shipment delays could not be averted, sources said.
Cross Oil announced that the company would be increasing the prices on all grades of naphthenic base oils on May 5. The producer will be raising the price of its 40 SUS (Saybolt Universal Seconds) to 200 SUS grades by 25 cents/gal, 200 to 750 SUS grades by 30 cents/gal and 750 SUS grades and above by 35 cents/gal. The company also noted that orders would be limited to contract quantities during the transitional period and sales may be dependent on available inventory.
Other naphthenic base oil suppliers continued to evaluate market conditions to decide whether any price revisions would be made.
Upstream, crude oil futures climbed on renewed spot demand and expectations that U.S. crude inventories would see a drawdown. News about the rise of coronavirus infections in India dampened values as this could mean reduced demand for fuels and oil.
OPEC+ abandoned plans for its Joint Ministerial Monitoring Committee to meet on Wednesday to decide whether the organization’s members would start to ease oil output cuts from May 1. Reports later circulated that the organization had indeed decided at a ministerial meeting on Tuesday to increase output as of next month given upbeat forecasts.
Meanwhile, OPEC is also encouraging its members to engage with the U.S. administration over a proposed U.S. bill against the group, known as NOPEC, and to explain that passing the bill could put at risk U.S. interests abroad, Reuters reported. A U.S. House panel passed a bill this week that would hold OPEC liable and leave it exposed to lawsuits for collusion in boosting oil prices, but it is unclear whether the full chamber will consider the legislation.
On Tuesday, April 27, June WTI futures settled at $62.94 per barrel on the CME/Nymex, and had closed at $62.44/bbl for May futures on April 20.
Brent futures for June delivery settled at $66.42/bbl on the CME on April 27, from $66.57/bbl on April 20.
Light Louisiana Sweet crude wholesale spot prices were hovering at $64.12/bbl on April 26 and had closed at $65.43/bbl on April 19, 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.