Base Oil Pricing Report

Base Oil Report


A few decades ago, the Japanese concept of just-in-time manufacturing captivated the automotive and apparel industries. Also known as the Toyota production system, it involved a streamlined workflow requiring lower investment and inventories, aimed at reducing the time needed to respond to market changes and finish a product quickly.

While it has lost some of its novelty and luster, it is still a method widely applied in many industries, and with a slightly different nuance, the concept could serve as a good description for the latest round of price increases taking place in the North American base oils market.

The increases implemented in January and February arrived just in time for the start of the spring buying season and reflected increases in crude oil and feedstock values. This provided solid justification for producers to adjust numbers after an eight-month hiatus in posted price revisions.

Motiva was the first out of the gate with an increase of 30 cents per gallon for all of its API Group II and III base oils, implemented on Jan. 13, and a majority of Group I, II and III suppliers quickly followed.

The increases, which lifted posted prices by 20 to 30 cents per gallon-depending on the cut and the supplier-saw implementation dates peppered between January 13 and February 12, before crude oil values tumbled.

One could say that the increases also arrived right before the coronavirus outbreak, which was expected to affect many business segments and weigh on base oil demand and pricing.

The virus not only slowed Chinas economy, but also the economies of many countries that rely on Chinese parts and products to keep manufacturing operations running.

Numerous auto plants and businesses in China and other nations, such as South Korea, were forced to shut down because of the disruptions to Chinas supply chain, and this was likely to have an impact on global base oil and lubricant consumption.

While the main concern remained the cost to human life, governments and organizations across the globe hoped that the spread of the virus would be contained and that its economic impact would be short-lived.

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