U.S. Base Oil Price Report


There were no unexpected developments in the U.S. base oil market this week, following a month of busy pricing activity, during which both paraffinic and naphthenic producers adjusted down numbers.

The moves resulted in decreases between 7 cents per gallon and 15 cents/gal on paraffinic oils, and 15 cents/gal on pale oils, implemented between mid-October and mid-November.

Some API Group II+ and III numbers remained unchanged as suppliers did not revise their postings, and a few naphthenic producers lowered values on a case-by-case basis without a formal announcement.

Demand in both segments was heard to have slowed down over the last two weeks, and the price cuts seemed to have done little to stimulate sales, a supplier acknowledged.

Aside from the most recent price decreases, a number of suppliers have been granting larger than normal discounts over posted prices to move product and protect market share, given that the market has turned highly competitive, sources added.

Fluctuating crude oil futures and a downbeat outlook for crude values in the coming months also weighed on price ideas.

Oil futures slipped on Tuesday, erasing gains linked to security concerns after the Paris attacks. The global oversupply in crude and petroleum products took center stage again and pressured prices down.

West Texas Intermediate closed on the CME/Nymex at $40.67 per barrel on Nov. 17, down $3.54 per bbl from its Nov. 10 settlement of $44.21.

Brent was trading around $43.57/bbl on the CME on Nov. 17, down $3.87/bbl from $47.44/bbl a week earlier.

Bright stock consumers were concerned about the tightening of global bright stock supply due to ongoing rationalization of Group I plants.

Ergon Refinings announcement this week that it would be starting production of a new Group I bright stock at its Vicksburg, Miss., naphthenic base oil plant may be welcome news to these buyers.

Ergon is planning to commence a turnaround at the plant in Jan. 2016, and global inventory will be increased in anticipation of the outage, with no supply disruptions expected.

In addition to routine maintenance, the outage will enable Ergon to make the final modifications to the crude distillation unit. As the company reported in 2014, this update will allow for processing of a wider slate of naphthenic crude from both domestic and global sources.

Additionally, the outage will include final tie-in installations for the hydrotreating unit modifications. The enhancements made to the hydrotreaters will be complete and operational by mid-2016.

The new hydrotreater operations will provide Ergon the capability to manufacture more highly refined products, as well as begin production of a new Group I bright stock. Production capacity of bright stock is anticipated at approximately 3,000 barrels per day (150,000 metric tons/year), and product will be available beginning in the third quarter of 2016.

In industry news, a large number of market participants met for the American Fuel and Petrochemical Manufacturers’ International Lubricants and Waxes conference in Houston last week.

Barbara Bellanti, former Independent Lubricant Manufacturers Association’s president and long-time ILMA member, conducted a presentation which focused on how her organization can partner with AFPM to advance critical industry issues.

One is the U.S. Environmental Protection Agency’s ban on production and import of mid- and long-chain chlorinated paraffins, which was originally set to be implemented in May 2016. Chlorinated paraffins are used in metalworking fluids as extreme-pressure agents –

especially in difficult drawing, forming and removal operations–for automotive parts, surgical components and aeronautical fasteners.

The Chlorinated Paraffins Industry Association, its members, and ILMA have been working to convince EPA to reverse its decision. While the regulation has not been revoked, the ban has been postponed until mid-2017. For more information about the chlorinated paraffins issue, read the Sep. 30 Lube Report article: EPA Gives Ground on CP Deadline.

Some additional challenges that ILMA members face include other government directives, the implementation of new health care regulations, changes in labeling requirements for obsolete motor oils (formulated for cars built prior to the 1930s), the difficulties in training and keeping quality employees, and new wax nomenclature issues, among many others.

Other presentations at the AFPM included discussions on supply changes in the bright stock segment, the global High VI base oil market, and a presentation about the use of lubrication for the International Space Station.

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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