February Base Oil Report

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Pandora’s Box   

In Greek mythology, Pandora’s box was a gift from the gods to Pandora, the first woman on Earth, given with the express stipulation that it should never be opened. The box contained all the evils of the world, which were released when curiosity got the better of Pandora and she opened the box. However, the box also contained hope, which Zeus had included to help humans survive the chaos that had been released with the box’s opening.

For the lubricants and base oils industry, the start of the New Year may be a bit like Pandora’s box—although it comes with a lot of hope, possibilities and optimism, it can also bring many challenges and uncertainties. For example, natural disasters and crude oil price fluctuations are elements that can have a negative impact on business and cannot be controlled. But there are also many actions that can generate positive outcomes.

In the last quarter of 2024 and the first few weeks of 2025, several North American base oil suppliers turned to exports to reduce inventories at home, given that activity in the domestic market remained sluggish. The first few days of January understandably brought little fresh business, but participants remained upbeat that activity would gradually pick up and show considerable improvement once the market entered the spring production cycle in late February or early March. 

Many consumers finished the year with lean inventories to avoid tax repercussions and were expected to return to trading to replenish inventories, too. Negotiations were ongoing to ship U.S. base oils to Mexico, Brazil, India and West Coast South America, with a number of transactions also concluded into Nigeria and South Africa.

On the naphthenic base oils front, values maintained a fairly steady trajectory, despite crude oil price fluctuations. A balanced-to-tight supply scenario of the light-viscosity grades offered support to pricing, even though a seasonal slowdown in demand for the heavy-viscosity pale oils from such segments as the tire and rubber industry placed some pressure on values. Based on past patterns, most segments should see revived buying interest in the spring, and producers were careful to monitor product allotments moving into the new year, as there were expectations of a tight supply-and-demand scenario.

The market was also expected to face uncertainties related to the new trade policies and immigration rules likely to be embraced by president-elect Donald Trump. More clarity was expected after his inauguration on January 20, although it will likely take some time before his new agenda takes shape.

While some market players entertained positive expectations in relation to Trump’s promise to support the oil and gas industry in the U.S., others wondered whether his intention of imposing tariffs on all imports would result in an increase in the cost of raw materials that many have no choice but to secure overseas. It was heard that some manufacturers have already started to stockpile those items that may be subject to higher tariffs in the new year.

Base oil posted prices were unchanged for most of December and early January, with the last posted price revisions announced between late October and late November. The price reductions had been triggered by sluggish demand, softer crude oil and feedstock prices, and inventory pressure.

Crude prices maintained a fairly steady trajectory over the last few weeks of 2024 and rallied in early January, despite lingering concerns about global demand levels. Traders continued to keep an eye on economic developments in major oil importing countries such as China to evaluate demand trends, as well as possible supply disruptions in the Middle East and Africa. West Texas Intermediate futures had settled at $68.59 per barrel on December 10 and climbed to around $74.25 per barrel by early January.

Downstream, lubricant demand remained dull, and blenders resorted to granting discounts to protect market share against a backdrop of increased competition and steep production costs—despite base oil price decreases in the last quarter of 2024. Some additive suppliers had granted discounts into select accounts in late 2024, too. However, not all customers enjoyed this benefit, while a majority of lubricant and grease manufacturers continued to deal with high energy and raw material prices. Given a drop in lubricant demand from key segments such as the automotive industry, competition among independent and major lubricant manufacturers has mounted and was anticipated to remain a concern in 2025.  


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