U.S. Base Oil Price Report


Chevron notified its customers that it would be increasing its API Group II posted prices on March 11. Other producers continue to monitor conditions closely, but have not announced any movements this week.

The 20 cent-per-gallon increase that Chevron will be implementing as of mid-week will lift the price of its 100R cut to $2.65/gal, its 220R to $2.80/gal, and its 600R to $3.00/gal.

Participants speculated that the price movement was triggered by revitalized demand, tightening availability and stabilizing feedstock values.

Large cargoes of U.S. base oils are making their way to export markets such as India and Brazil, tightening domestic supply – which had been on the long side for several months – at a time when demand typically starts to pick up for the spring production cycle.

There have also been significant requirements of heavy-vis grades by a producer in Canada, who may have seen its heavy barrel yields curtailed due to the lack of supply of appropriate crude oil, sources commented.

While the United Steelworkers’ Union (USW) strike that started on Feb. 1 and has spread to 15 locations does not appear to be having a direct impact on base oil operations, there is speculation that several refineries may be processing less crude on account of the strike, making vacuum gas oil less readily available.

Talks continued in Houston as Shell, representing the oil industry, and USW officials discuss a three-year labor contract, but progress has been characterized as slow.

Base oil spot volumes were heard to be drying up, especially in the Group II segment, with a couple of customers reporting that they had been unable to secure extra cargoes of the light-vis cuts from their regular suppliers.

Added to this is the fact that a number of base oil units were understood to be running at reduced capacity because of recent lean margins and oversupply issues.

Some spot values have therefore edged up, and there has been talk that additional producers were mulling possible posted price moves. However, sources surmised that revisions would not take place until later this month or possibly April, when spot prices have been shored up and market trends become more clear-cut.

It is still somewhat of a mystery whether ExxonMobil will be bringing the additional barrels from its Baytown, Texas, expansion on line in the next few weeks – as originally scheduled – or whether the start-up will be delayed.

Sources said that samples from the plant are now available, but no sizeable cargoes have been shipped out to customers yet. The producer was heard to have secured product from another Group II supplier to support its own downstream operations, while customers who have arranged to receive product from the expanded ExxonMobil plant are also purchasing material from other producers until the new barrels come on stream.

All was quiet on the naphthenic front, following last week’s price decrease by Ergon Refining. The producer lowered the price of its naphthenic oils 15 to 25 cents per gallon; the amount of the decrease appeared to depend on the viscosity of the product, the purchased volumes, and the application.

Buyer sources were of the opinion that Ergon had undertaken this adjustment to bring its spot numbers more in line with its contract prices. No other pale oil producers revised prices this week.

Upstream, West Texas Intermediate (WTI) futures tumbled as the dollar strengthened and there continued to be signs that U.S. crude stockpiles have grown, exacerbating the global supply glut.

WTI futures settled on the CME/Nymex at $48.29 per barrel on March 10, down $2.23 per barrel from a settlement at $50.52 per barrel on Mar. 3.

Brent crude was trading around $56.39 per barrel on the CME on March 10, down $4.63 per barrel from $61.02 per barrel 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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