Base Stocks

Base Oil Report


Base Oil Report

A Season of Contrasts and Contradictions

Base oil buyers and sellers are still trying to wrap their heads around what has been occurring in the market this year, culminating in an unusual summer that has ushered in posted price decreases instead of the typical markups seen in previous years.

While base oil demand generally picks up in late February or early March as blenders stock up in preparation for the busy spring production cycle, this year consumption levels have been well below expectations. The lackluster buying interest, growing supplies, and softer crude oil and feedstock prices placed downward pressure on pricing. 

In early June, paraffinic base oil suppliers communicated posted price decreases between 5 cents and 35 cents per gallon, depending on the product and the producer, with implementation dates set between June 1 and June 19. SK Enmove also implemented an additional 5- and 15-cents-per-gallon decrease on July 1.

The decreases contrasted with the almost monthly base oil price increases observed in the first half of 2022. These initiatives were driven by healthy demand, tight supplies, and steep crude oil and feedstock prices following Russia’s invasion of Ukraine.

The June and July price decreases encouraged some consumers to step back into the market and purchase additional cargoes, with producers seeing some signs of improvement in July order volumes. Still, many sellers acknowledged that the price reductions hadn’t been as successful in attracting new business as expected. A few blenders were reportedly well supplied and continued to secure only minimal term volumes to run daily operations. 

Forecasts that the hurricane season in the Atlantic Basin would be less active than usual this year seemed to discourage the building of inventories to cover for potential output disruptions. However, a soaring heat wave that affected many parts of the United States in late June led some meteorologists to reverse earlier forecasts and increase their warnings about this year’s hurricane season. In early July, forecasters at Colorado State University said they now expected an above average Atlantic hurricane season, with around 18 tropical cyclones and at least one major hurricane possibly making landfall this year, according to The New York Times.

Base oil supplies remained plentiful because of sluggish demand combined with the fact that most refineries were being run at full rates given booming gasoline demand during the summer driving season. Base oil output in particular was given a boost as refiners preferred to stream more feedstocks into base oil production because distillates margins were less attractive.

Domestic supplies of some API Group I and Group II grades grew slightly long, despite suppliers being able to conclude several export transactions to India, Brazil, Mexico, South Africa and Nigeria, amid ongoing and upcoming turnarounds at base oil facilities in the U.S. Gulf.

Chevron’s Group II plant in Pascagoula, Mississippi, was reportedly taken offline in late June for a three-week turnaround, which was expected to put a dent in domestic supplies of Group II grades. 

Calumet also scheduled a routine turnaround at its Group I and II plant in Shreveport, Louisiana, in the second half of July. Like Chevron, the producer built inventories to meet requirements during the outage.

Group III supply was fairly balanced against demand, but additional imports from the Middle East may be tilting the scale toward oversupply conditions. There were expectations that volumes imported from South Korea could also see an increase in the coming months, as supply in that region has started to lengthen.

Reports circulated about some Group III cargoes being offered in the U.S. from a GTL plant in the Middle East, although the supplier does not typically sell much product into the merchant market. Another unusual source of Group III grades could potentially be China, with sources mentioning that a key Chinese producer was hoping to export product to the U.S. through an exclusive distributor.

In the naphthenic camp, prices remained steady, although some buyers saw downward price adjustments because several refiners’ formula prices are linked to a diesel index, and diesel prices have slipped since earlier this year.

While crude oil prices have softened, a majority of suppliers polled concurred that conditions in the naphthenic base oils sector were dissimilar to those impacting pricing in the paraffinic segment. Supply and demand conditions were balanced-to-tight, propping up prices. Steady export business also helped manage domestic inventories and supported pricing.

The light-viscosity pale oils were in high demand within the transformer and construction segments. While supplies of the heavier viscosities were slightly more readily available, summer consumption from the asphalt and rubber sectors was described as quite vigorous.

Base oils and lubricants market activity habitually tends to ease in the second half of the year. Having just come out of an unusual first half, all bets are off as to what might be expected in the coming months.  

Gabriela Wheeler is base oil editor for Lubes’n’Greases. Contact her at