North America

Base Oil Report


Like many parts of the country, the U.S. base oil market encountered fairly frigid conditions in recent months, with demand and prices barely moving on the meter and margins registering almost sub-zero levels in some industry segments.

Posted prices finally dipped in January, as producers saw themselves compelled to reduce values on the back of lukewarm demand, ample availability and the need to protect market share. A majority of suppliers revised posted prices down by 10 to 30 cents per gallon, depending on the producer and the grade, with implementation dates falling between Jan. 10 and Jan. 29.

Within the API Group I segment, ExxonMobil, PBF, HollyFrontier and Calumet lowered prices by 10 to 14 cents per gallon. One exception was bright stock, which underwent no adjustment.

A wider spread of adjustments was seen within the Group II segment, with Motiva, Phillips 66, Flint Hills Resources and Chevron dropping prices from 13 to 30 cents per gallon; these varied according to the producer and the cut. ExxonMobil also revised all of its Group II+ prices down by 25 cents per gallon.

In the Group III arena, SK Lubricants and Phillips 66 implemented reductions of 25 cents per gallon across the board.

Producers hoped that the easings would encourage consumers to secure more volumes, and the moves did indeed motivate many buyers to step into the market in the last days of January and early February. The price decreases also helped stem the decline in spot pricing, as there was no need for suppliers to continue offering enticements on spot levels to promote sales, market participants noted.

At the same time, spot supply of the light-viscosity barrels started to tighten considerably, likely as a result of producers having adjusted output to meet contractual obligations and avoid a product overhang.

Suppliers were hoping that the temperate purchasing trend would persist into late February and March, when buying activity typically heats up ahead of the busy spring production season. At that time, a number of planned turnarounds could also turn up the heat in terms of the supply and demand balance, although additional Group II capacity coming on stream at the new Chevron plant in Pascagoula, Miss., could have the effect of a cooling breeze.

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