U.S. Base Oil Price Report

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Chevron, ExxonMobil and Avista Oil announced posted price increases this week, introducing the sixth round of markups since the beginning of the year. The initiatives were driven by persistent supply shortages, healthy demand, and firm crude oil and feedstock values. In production news, Ergon began the restart process at its West Virginia refinery, following a fire on May 29.

Chevron communicated a posted price increase of 40 cents per gallon for its API Group II 100R grade, and a 30 cents/gal markup for its 220R and 600R base oils, with an effective date of June 15. The company noted that posted pricing was increasing to reflect current market conditions.

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According to reports, ExxonMobil will be increasing its Group I AC100-SN150 cuts by 15 cents/gal, its SN330 and AC600 cuts by 30 cents/gal, and its bright stock by 30 cents/gal as well. Its Group II EHC65 will be going up by 35 cents/gal and its Group II+ EHC45 will move up by 30 cents/gal, all effective June 18. 

Avista Oil will also be raising its Group II+ and Group III postings by 30 cents/gal on June 21.

Paulsboro intends to implement a 15 cents/gal increase on its Group I light-vis grade, 30 cents/gal on its mid- and high-viscosity grades and 30 cents/gal on its bright stock on June 23. The price table below will be revised next week when the increases go into effect.

A previous wave of price hikes had catapulted paraffinic posted prices up by 20, 30 and 40 cents per gallon between May 26 and June 11, and by 30 to 35 cents/gal for naphthenic base oils.

The unusually frequent base oil price adjustments squeezed downstream manufacturers’ margins further, prompting several to seek price hikes on lubricants, greases and additives in the realm of 5 to 15% for implementation in July and August. These follow several rounds of price increases during the previous months. Not only have their margins suffered, but manufacturing rates have also been affected, with some blenders having to reduce or halt production due to a lack of base oils and additives.

The restart of Ergon’s Newell, West Virginia, refinery was welcome news for base oil market participants, as the outage of the base stocks unit at the refinery had brought about a further tightening of the market. The refinery had shut down following a fire on May 29, and the company had declared force majeure on supplies. For more information on the restart of the refinery, see related story in this issue.

Base oil market players were also optimistic that refinery run rates in general would start to ramp up, as fuels demand–in particular jet kerosene–has increased with the easing of pandemic-related restrictions. According to reports from the Energy Information Administration, jet fuel demand is estimated to hit almost 1.5 million barrels a day during the third quarter, up from 1.1 million in the first quarter and more than 50% higher than a year earlier. However, global jet fuel demand was not expected to reach pre-pandemic levels for a while, as many long-haul flights have been cancelled given ongoing border restrictions in many countries.

Base oil production at refineries had been restricted due to a lack of feedstocks given the ongoing operating rate reductions.

Both paraffinic and naphthenic suppliers have been striving to build inventories and at the same time catch up with orders as shipping out material was still suffering delays at a number of facilities. Consumers noted that shipments were behind by five weeks in some cases, and that a number of producers have already notified customers that they would be unable to offer spot volumes until the end of the year. Inventories were generally lean, which made some participants uneasy in view of the current hurricane season, which lasts from June 1 until Nov. 30.

Conditions were extremely strained within the Group I and Group II segments, with bright stock in particular showing strong demand and negligible spot volumes. Producers were even struggling to meet contract requirements, and had almost zero spot availability for domestic or export transactions. Spot prices were on a continuous upward march for the last several months and were surpassing contract prices.

Mexican buyers expressed buying interest in light grades for fuel blending and a number of cargoes were heard to have been concluded for shipment to the neighboring country. There were also reports that a South Korean cargo would be moving to Mexico this month–a reflection of how tight the market in North America was, as Mexico typically receives sufficient supplies from the U.S. and deep-sea cargoes were less common.

Group III base stocks supply was also heard to be snug because of robust demand, mainly for automotive applications, and recent turnarounds in South Korea, Europe and the Middle East which have resulted in reduced availability for export to the U.S.

Base oil prices received a further push from climbing crude oil values. Oil prices jumped nearly 2% to their highest in more than two years on Tuesday, buoyed by prospects that demand would continue on its path to recovery in the second half of 2021.

Prices received an additional boost from predictions by the world’s biggest oil traders, who said they see oil prices staying above $70/bbl, with demand expected to return to pre-pandemic levels in the second half of 2022, according to Reuters.

July West Texas Intermediate (WTI) settled at $72.12/barrel on June 15, up from $70.05/bbl on June 8. Values hit a session high of $72.19 a barrel, their highest since October 2018.

Brent futures for August delivery settled at $73.99/bbl on the CME on June 15, from $72.22/bbl on June 8.

Light Louisiana Sweet crude wholesale spot prices were hovering at $72.84/bbl on June 14 and had closed at $71.21/bbl on June 7, 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.