Motiva increased its API Group III posted prices this week, completing a round of hikes that started on April 26 with Phillips 66 implementing a price increase on its Group II+ and Group III base oils. A vast majority of paraffinic and naphthenic producers have now implemented increases that went into effect in late April and early May.
Motiva raised its Group III prices by 30 cents per gallon, effective May 11. The producer’s Group II grades were not adjusted at this time. Motiva had last lifted Group II postings by 40 cents/gal and 50 cents/gal on April 1.
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Other paraffinic producers increased posted prices by 15 cents/gal, 30 cents/gal and 40 cents/gal, depending on the viscosity and the producer. Group I light-viscosity grades edged up by 15 cents/gal, while most of the mid- and heavy-vis grades climbed by 30 cents/gal. Bright stock and Group II+ and Group III cuts were adjusted up by 40 cents/gal.
On the naphthenic base oils front, producers nominated price increases of 25, 30, 35 and 40 cents per gallon, depending on the product and the location, for early May implementation.
All of these increases were driven by extremely limited supply against healthy demand, reduced refinery run rates, soaring spot prices and firm crude oil and feedstock values.
The latest series of base oil price increases placed additional pressure on finished lubricant, grease, additives and related products manufacturers. Many of these manufacturers announced price increases of up to 12% on their products to be implemented in early June. These would be in addition to a previous round that called for hikes of 3-15% for late April/early May implementation as suppliers tried to offset the steadily rising cost of base stocks and other raw materials. Base oil and additive shortages resulted in reduced output at some lubricant facilities, and a few blenders have placed customers on allocation.
The tight base oil supply situation was not expected to see any relief soon. Aside from ongoing maintenance shutdowns and unplanned extensions to recent turnarounds at base oil facilities, the shutdown of the Colonial Pipeline over the weekend was expected to cause feedstock supply disruptions and affect base oil production.
A ransomware cyber-attack forced the major U.S. fuel pipeline to be taken off line. The pipeline carries 2.5 million barrels a day, or 45% of the East Coast’s supply of diesel, gasoline and jet fuel. The operator took itself offline on Friday after the cyber-attack, and work to restore service was ongoing, The New York Times reported on Tuesday.
Last Sunday, Motiva shut down two of its three crude distillation units and a reformer at its Port Arthur, Texas, refinery, along with the lube oil hydrocracker because of the Colonial Pipeline outage, according to a Reuters report. Temporary idling production on the two CDUs reduces production at the Motiva refinery by 45%. Motiva operates a Group II and Group III base oil plant in Port Arthur. Production had already suffered a setback following a winter storm in mid-February that had forced the producer to shut down operations. Sources said that contract shipments were suffering delays, and that there would likely be no spot volumes available for months. Motiva did not comment on the status of its operations.
Other base oil producers were dealing with the delayed resumption of output, following routine turnarounds.
Ergon communicated a slight delay in the restart process of its paraffinic refinery in Newell, West Virginia, after completing a maintenance turnaround that began on April 9. “During this planned maintenance event, the company implemented several reliability projects to improve security of supply to customers,” the company explained. “The turnaround schedule was extended approximately one week due to COVID-19 precautions and increased scope of work. The refinery began its deliberate multistage restart process on May 5, 2021.” Although some delays in customer shipments are anticipated, the company was working diligently to minimize supply disruptions during the startup from the planned maintenance and will continue to keep customers apprised of the situation.
HollyFrontier restarted its Group I plant in Tulsa, Oklahoma, and Calumet its Group I and Group II unit in Shreveport, Louisiana, in April, following extended turnarounds that lasted almost two months, instead of the planned 30 days, due to damages brought about by extreme winter weather. While the plants were heard to have increased operating rates and were running well, the suppliers were still dealing with shipment delays. As a result, availability of Group I grades, and bright stock in particular, was not expected to improve until June or July.
Spot supplies of most grades remained very limited, but the light grade inventories have started to improve, sources said. “There is still very little non-contract oil available,” a source commented, while another agreed: “We are receiving calls from spot buyers for many grades, especially heavy.”
A similar scenario was observed on the naphthenic side of the business, with the heavy grades described as very snug. A number of pale oil cargoes were heard to have made their way from the U.S. to South America and Europe, where availability was also strained.
A U.S. supplier was understood to have offered light grades to Mexico, a market that is struggling to get a hold of base oil shipments, particularly mid-viscosity and heavy grades. A distributor was also reported to have offered some bright stock spot volumes near $6 per barrel, but it could not be ascertained whether any business had been concluded at this level.
U.S. producers who have continued to participate in the export market have focused on shipping product to India, Israel and Brazil, but Indian demand has weakened on uncertainties related to an alarming flare-up in coronavirus infections, forcing sellers to look for opportunities in other destinations. Buyers in South America appeared willing to pay a premium on heavy grades as they were anxious to source U.S. material, given that base stock prices from other origins were not as attractive.
Upstream, crude oil futures slipped on Wednesday after moving steadily up earlier in the week as fears of a supply shortage of refined products eased despite the Colonial pipeline remaining offline. Prospects of an imminent restart assuaged some of these concerns. Sentiment was also bearish after the World Health Organization declared India’s B.1.617 coronavirus strain as “a variant of concern,” fueling worries about reduced oil demand.
On Tuesday, May 11, June WTI futures settled at $65.28 per barrel on the CME/Nymex, and had closed at $65.69/bbl on May 4.
Brent futures for July delivery settled at $68.55/bbl on the CME on May 11, from $68.88/bbl on May 4.
Light Louisiana Sweet crude wholesale spot prices were hovering at $66.92/bbl on May 10 and had closed at $66.36/bbl on May 3, 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.