U.S. Base Oil Price Report

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Motiva stepped out with a base oil posted price increase this week, and was quickly followed with similar initiatives by Chevron and ExxonMobil on the back of tightening supply and climbing crude oil and feedstock prices.

Motiva communicated an increase for its API Group II and III posted prices of 15 cents per gallon across the board, which became effective on June 15.

Chevron’s U.S. Gulf Coast Group II posted pricing will increase by 16 cents/gal for the 100R grade, and 15 cents/gal for the 220R and 600R grades, effective June 17, “to reflect current market conditions,” a company source said.

There were also reports that ExxonMobil would be marking up its Group I, II and II+ prices by 15 cents/gal across the board, with an effective date of June 24. The price table below will reflect the increases next week, which is when they are scheduled to become effective.

Other producers were heard to be evaluating market conditions to decide whether to adjust prices over the next few days.

Paraffinic base oils have seen a steady rise in demand since mid-May, leading to a more balanced scenario. Requirements are still off from their typical levels at this time of the year, but they have shown a significant improvement compared to the period when coronavirus-related lockdowns were in effect.

“Supply in general is definitely tight,” a buyer conceded, while others still saw the market as slightly fragile. “I’m seeing some market segments coming back in June–perhaps to 70 percent, which seems great when you were at 30 percent,” another source noted.

Given that several producers continued to run base oil plants at reduced rates, and buyers have returned to the market to replenish stocks, the supply glut observed in April and May has started to dissipate.

The lubricant segments that supply the automotive industry have experienced a marked pickup in activity as lockdown measures have been lifted in most states and there is a significant increase in driving.

Demand for industrial oils and greases has also improved, but it is lagging somewhat compared to the other segments, sources explained.

The tightening of availabilities – particularly of the lighter grades – and a rise in feedstock values had prompted suppliers to abandon market discounts and temporary voluntary allowances or value adjustments that were ubiquitous in the previous months.

Aside from a pickup in domestic demand, a number of export opportunities have surfaced, allowing producers to place extra volumes into overseas outlets.

It was heard that Mexican demand for API Group I cuts from the United States had started to perk up, and there were also some inquiries for Group I and Group II base oils from Brazil.

Several Group II barrels have also been slated for shipment to India later this month. All of these cargo movements amount to more than 50,000 metric tons of base oils that have been earmarked for export, according to sources.

Group III imports from the Middle East had seen a reduction in the U.S. in March and April due to the turnaround at Abu Dhabi National Oil Co.’s base oil plant in Ruwais, which coincided with the sharp drop in demand brought about by the pandemic. However, since the restart of the plant in May, supply has become more plentiful.

On the naphthenics front, demand has also improved compared to April and May, but product remains plentiful to cover requirements, despite a turnaround at Calumet’s base oil plant in Princeton, Louisiana. The producer has been able to meet contract obligations during the outage, and was expected to bring its plant back up by the end of the week.

The Valero naphthenic base oil plant in Three Rivers, Texas, was also heard to have been taken off-line in mid-May due to a lack of feedstocks, but was expected to be restarted around May 20 as the feedstock supply issues appeared to have been resolved.

Rerefiners were also gradually restarting facilities, or ramping up production rates, as supply of used oil employed for feedstock has been increasing as more people take to the road, and oil changing stations reopened.

Upstream, crude oil futures were trading up most of the day on Tuesday, even though there were concerns that the U.S. may experience a second wave of Covid-19. However, observers said that a second round of lockdowns, which would inhibit further demand for oil, seemed unlikely.

Futures moved down by the end of the day on Tuesday on an American Petroleum Institute estimate of another build in crude oil inventories, this time of 3.857 million barrels for the week ending June 12. U.S. oil output has fallen from 13.1 million b/d on March 13 to 11.1 million b/d on June 5, according to the Energy Information Administration, reflecting a drop of 2 million b/d.

On Tuesday, June 16, July WTI futures settled at $38.38 per barrel on the CME/Nymex, and had closed $38.94/bbl on June 9.

Brent futures for August delivery closed at $40.96/bbl on the CME on June 16, from $41.18/bbl on June 9.

Light Louisiana Sweet crude wholesale spot prices settled at $38.22/bbl on June 15 and had closed at $39.57/bbl on June 8, according to the Energy Information Administration.

Low sulfur vacuum gas oil and high sulfur VGO were trading at July WTI plus $4/bbl (or $42.38/bbl) on Tuesday, June 16, and were hovering at $43.69/bbl on June 9, according to OPIS/PetroChem Wire assessments.

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.

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