U.S. Base Oil Price Report


The turmoil of price changes observed in the U.S. base oil market appears to have slowed down somewhat, although revisions on the naphthenic side continue to trickle in. Calumet will be decreasing prices on Dec. 16, while Cross will lower values on Dec. 19, joining a round of price revisions that Ergon had initiated the previous week.

Calumet will lower its naphthenic base oils by 20 cents per gallon, effective Dec. 16. Similarly, Cross will be decreasing its naphthenic oils by the same amount as of Dec. 19.

On Dec. 8, Ergon had reduced the price of its naphthenic base oils by 20 cents/gal as well, with falling crude oil prices mentioned as one of the main reasons for the decreases.

Slowing demand and ample supply were also behind the series of decreases implemented since October, both on the naphthenic, as well as on the paraffinic side.

In the previous two weeks, a string of price revisions undertaken by ExxonMobil, HollyFrontier, Calumet, and Paulsboro had resulted in API Group I cuts of 10 cents/gal for a majority of grades, with bright stock falling 20 cents/gal.

ExxonMobil also moved Group II+ prices down by 10 cents/gal on Nov. 28.

There was no indication whether other paraffinic producers would be revising prices this week, although market players felt that further adjustments could be around the corner.

In terms of downstream production, a few industry participants commented that despite recent price decreases on the base oils side, there had been no formal reductions on the finished lubricants side.

While some sources mentioned that changes on the lubes side typically take longer to be put into action, others said that some suppliers had started to offer discounts to a number of selected accounts, even though there had not been an official notification about the decreases.

Sources also said that since a couple of the main lubricant manufacturers had not yet announced any changes, the other suppliers were waiting for these producers to take the first step.

It was also heard that additive suppliers had not set about changing prices either, and additives constitute a significant part of the finished lube costs, sources explained, so one change often hinges on the other.

The current U.S. base oils market oversupply situation was discussed at length at the ICIS Pan-American Base Oils and Lubricants Conference in New Jersey on Dec. 4-5.

Several speakers addressed the question on how base oil producers will deal with oversupply in the near future, and there do not seem to be easy answers, Ian Moncrieff, Director of Kline & Co.s Energy Practice, explained.

In the base oil universe, Big Bang is happening now, Moncrieff said, adding that new capacity is being added much faster than the rate at which production is being retired, and this will continue for at least two years.

In the last 22 years, lube demand has been basically flat, and Moncrieff believes that this will not change dramatically in the near future, as demand growth uncertainties linger.

In production news this week, Cross is planning a two-week routine turnaround in the first quarter of 2015.

It was heard that HollyFrontiers 9,500 barrels per day Group I plant in Tulsa, Okla., was back on-line, after a brief shutdown in November, but details could not be confirmed with the producer.

Upstream, West Texas Intermediate crude futures traded near five-year lows, but gained slightly on Tuesday.

WTI settled on the CME/Nymex at $63.82 per barrel on Dec. 9, down $3.06/bbl from a settlement at $66.88/bbl on Dec. 2.

The contract settled at $63.05 on Dec. 8 – the lowest settlement since July 2009, according to Bloomberg News – on concerns over slowing global economic growth and potential for political turmoil in Europe, specifically Greece.

Brent crude was trading around $66.19 per barrel on the CME on Dec. 8, down $6.35/bbl from $72.54/bbl a week ago.

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

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