U.S. Base Oil Price Report


The U.S. base oils market is still trying to digest the round of price increases that was initiated by Chevron on March 9 and followed by a majority of producers.

The exceptions appeared to be Motiva, which has sat out this round of hikes so far, along with SK Lubricants and Phillips 66, which did not lift their API Group II+ and III postings either.

The increases resulted in the Group I cuts moving up by 12 cents, 15 cents and 17 cents per gallon, depending on the grade and the producer, while the Group II oils jumped by 15/gal to 20 cents/gal. ExxonMobil and Kleen Performance Products also raised their Group II+ postings by 15 cents/gal.

The hikes were heard to have been fueled by recovering crude oil prices and tightening base oil supply/demand.

There were no price changes heard on the naphthenics side of the business, but producers were understood to be evaluating market conditions and keeping a close eye on crude oil price fluctuations.

News broke this week that two major energy companies would be parting ways after a longstanding partnership. Royal Dutch Shell Plc. and Saudi Refining Inc. -through its subsidiary Saudi Aramco – have signed a letter of intent to divide the assets of Houston-based Motiva Enterprises LLC. The companies formed Motiva in 1998 and have operated it as a 50-50 refining and marketing joint venture since 2002. According to the letter of intent, Saudi Refining Inc. would retain the Motiva name along with the joint ventures 600,000-barrel per day refinery in Port Arthur, Texas, and 26 distribution terminals (for more information, see related article in this issue of Lube Report).

While there was no direct comment from Motiva about the repercussions of the separation from Shell, an industry source said that the split would probably bring about very few changes to Motivas base oil operations. Motivas Port Arthur refinery houses a 40,300 b/d Group II base oil plant, according to LubesnGreases Global Guide to Base Oil Refining.

Sources also commented that it would be interesting to observe if this development may have an impact on the way Saudi Refining Inc. plans to market the Group II oils slated to come on stream from its joint venture Luberefs expanded plant in Saudi Arabia later this year.

Luberefs Yanbual Bahr refinery expansion – which will add 14,000 b/d of Group II base oil and increased bright stock production – is close to being completed, with production expected to commence in the third quarter, according to market sources. Luberef, headquartered in Jeddah, is a 70-30 joint venture between Saudi Aramco and Jadwa Industrial Investment Co.

In other production news, ExxonMobil was heard to have begun the process of ceasing Group I base oil production at its Beaumont, Texas, plant. A source familiar with the companys operations confirmed this week that the producer was progressing the shutdown of the plant as was previously communicated.

Base oil production at the facility is expected to stop during the second quarter, and customers who had been sourcing base stock from this plant will receive product supplied by the companys facilities in Baytown, Texas, and Baton Rouge, La.

The Beaumont plant used to be the third-largest source of Group I base oil in North America, with a capacity of 10,000 b/d, but the producer decided to cease production in response to a global trend toward more highly refined stocks.

Baton Rouge can produce 16,000 b/d of Group I base oils, and Baytown 9,800 b/d. In addition, Imperial Oil – which is 69.6 percent owned by ExxonMobil – has a 2,400 b/d Group I plant in Strathcona, Canada.

Upstream, West Texas Intermediate futures climbed on Tuesday after data showed crude inventories at the Cushing, Oklahoma, delivery hub had fallen for the first time since January, and on news about the deadly attacks in Brussels, but gains were limited by concerns that U.S. energy companies would start to ramp up drilling again after the rebound in crude prices.

WTI settled on the CME/Nymex at $41.45 per bbl on March 22, up $5.11 per bbl from its March 15 settlement of $36.34 per bbl.

Light Louisiana Sweet wholesale spot prices closed at $42.31 per bbl on March 21, compared with $39.85 per bbl on March 14, according to data from the U.S. Energy Information Administration.

Brent was trading at $41.79 per bbl on the CME on March 22, up $3.05 per bbl from $38.74 per bbl a week earlier.

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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