U.S. Base Oil Price Report


Chevron announced a posted price increase this week, which will become effective on October 4. This is the second initiative to emerge in the paraffinic segment over the last few days, as Flint Hills Resources lifted prices about a week ago. On the naphthenic side, Ergon announced a price increase, and Cross Oil communicated a price hike as well.

Chevron will be increasing postings of its API Group II 100R, 220R and 600R base oils by 12 cents per gallon to reflect current supply/demand balances and overall market conditions, a company source said.

Last week, Flint Hills Resources had notified customers that the producer would be increasing its Group II 70/75 and 110-vis oils by 11 cents/gal and its 220 and 600-vis grades by 14 cents/gal as of Sept. 28.

The two producers had lowered their postings just before Hurricane Harvey made landfall in Texas in late August, when the base oil market situation was quite different from what it is now. The decreases had been in the realm of 5 to 22 cents/gal, depending on the producer and the grade.

Plant outages and logistical issues caused by the hurricane were still impacting the business, as availability of most base oil grades has tightened considerably, with supply of the Group II cuts being the most strained.

Various suppliers have been approached by buyers in search of spot cargoes to make up for some of the decreased availability from two major suppliers, Motiva and ExxonMobil, who have implemented a force majeure and an allocation program to manage their base oil supplies on the back of plant outages.

However, most producers have little excess availability as they are prioritizing the fulfillment of contractual obligations.

Buyers have been affected by the supply issues in different ways, with some seeing only a small reduction in their regular shipments, and others still waiting to receive further confirmation from suppliers.

Lubricant manufacturers lamented that the increasing base oil prices were impacting them in terms of market economics and margins, since finished lubricant market prices have not reacted upward yet, and were actually lagging from the base oil increases implemented in April and May.

Upward price pressure was also noted on the naphthenic side of the business, with producers keeping a close eye on crude oil prices, as they have moved up in recent weeks, as well as on product availability, which has narrowed following shutdowns and reduced rates at three naphthenic base oil plants on the U.S. Gulf Coast.

All naphthenic inventory is very low on all grades due to the lower production, a market source commented.

LyondellBasells Houston unit and Valeros Three Rivers refinery were forced to shut down due to flooding, while operating rates at Calumets Princeton, Louisiana, naphthenic unit had been reduced due to a slight shortage of incoming crude.

LyondellBasells 3,600 b/d naphthenic base oils and 1,000 b/d paraffinic Group II plant in Houston remains shut down, but is expected to restart next week, according to sources familiar with the producers operations.

Valeros refinery in Three Rivers was heard to have restarted operations, but it could not be confirmed whether its 2,400 b/d naphthenic base oils plant was running.

Calumets Princeton plant continues to run at reduced rates due to crude supply issues caused by the hurricane, but conditions seem to be improving. The plant can produce 6,900 b/d of naphthenic oils.

Calumet was also planning to shut down its Shreveport, Louisiana, plant in mid-November for a scheduled turnaround, but the company has moved up the maintenance to October 15. The plant will remain off-line for two weeks, and the producer will continue to cover contractual requirements from existing inventory during the outage. The Shreveport paraffinic plant has capacity to produce 4,800 b/d of Group I, 6,600 b/d of Group II, and 400 b/d of Group III oils.

In terms of naphthenic base oils values, Ergon said in a press release yesterday that it will raise prices by 15 cents per gallon on Oct. 6 on all viscosities. Shortly after Ergon’s announcement, Cross Oil communicated a similar increase of 15 cents/gal for its naphthenic oils.

Meanwhile, Mexican buyers have also been hoping to source product from the U.S. as base oil production at the local producers plant was heard to have been idled.

U.S. suppliers confirmed that they had received inquiries for both naphthenic and paraffinic oils from Mexico, as well as South America, but most requirements could not be filled immediately due to a shortage of product available for export. Price ideas were inching up, but even if buyers were willing to pay the higher indications, some sellers were unable to supply the requested volumes.

To one of the U.S. producers surprise, there have also been product inquiries from China.

Upstream, crude oil futures traded within a narrow range near $50 per barrel on Tuesday after settling at the lowest level in more than a week on Monday. Concerns about an uptick in global supplies given a rise in OPEC production last month were offset by expectations that reports issued later this week would show a second-straight weekly decline in U.S. crude inventories.

On Tuesday, Oct. 3, West Texas Intermediate futures settled on the CME/Nymex at $50.42 per barrel, down $1.46/bbl from $51.88 per barrel on Sept. 26.

Light Louisiana Sweet wholesale spot prices closed at $55.72 per barrel on Oct. 2, down from $58.22/bbl on Sept. 25, according to data from the U.S. Energy Information Administration.

Brent was trading at $56/bbl on the CME on Oct. 3, down $2.44/bbl from $58.44/bbl on Sept. 26.

Low sulfur vacuum gas oil was at Nov WTI plus $14.25/bbl ($64.83/bbl) and high sulfur VGO was at crude plus $11.50/bbl ($62.08/bbl) on Oct. 2.

In comparison, low sulfur VGO was hovering at $64.72/bbl and high sulfur VGO at $62.72/bbl on Sept. 25, according to data published by PetroChemWire.

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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