U.S. Base Oil Price Report

The precipitous fall of crude oil prices over the last two weeks and devastating effects brought about by the coronavirus pandemic on everyday life, healthcare systems and the world’s economy prompted hefty base oil posted price decreases this week.

Motiva seemed to be the forerunner of the movements, communicating a 60 cent per gallon reduction on all of its API Group II and III base oils, effective March 24.

The producer’s adjustment triggered “an avalanche” of revisions (as a source aptly described it) by other producers, including Excel Paralubes, Chevron, ExxonMobil, Petro-Canada, HollyFrontier, Calumet and SK Americas.

Excel Paralubes lowered its Group II Pure Performance postings by 60 cents per gallon across the board, with an effective date of March 24.

Effective March 25, Chevron will be marking down its Group II US Gulf Coast posted pricing to “reflect current market conditions,” a company source said. The company’s Group II 100R grade will be reduced by 58 cents/gal, while its 220R and 600R grades will be lowered by 60 cents/gal.

There are reports that ExxonMobil will decrease all of its Group I, II and II+ base stocks by 60 cents/gal as well, effective March 27.

Petro-Canada plans to adjust down all of its Group II and II+ grades by 60 cents/gal, as of March 27. The producer did not announce any movements on Group III cuts at this time.

Along similar lines, HollyFrontier’s Group I base oils will also decrease 60 cents/gal on March 27.

Calumet will be reducing all paraffinic grades by 60 cents/gal, effective March 27 as well.

SK will be lowering its Group II+/III base oil postings by 40 cents/gal, while its Group II bright stock will be adjusted down 60 cents/gal, with an effective date of April 1. The Price Table below will reflect the price change next Wednesday, when the decrease goes into effect.

All of these adjustments come less than month after an initial round of paraffinic price decreases started to be implemented in early March. Some participants were skeptical that the fresh decreases would help improve fundamentals and that they would have the effect of bolstering demand in the short term, because the disruptions caused by the virus outbreak were not limited to the base oil industry.

The upheaval caused by the pandemic appeared to have overpowered all aspects of life, and has intensified in the United States over the last couple of weeks as the number of infections and related deaths multiplied.

Several states have implemented strict shelter-in-place and social distancing measures, with factories, businesses and schools closing across the nation and leading to a decrease in general consumption, driving and public transportation use.

This, in turn, would certainly lead to a drop in fuel and lubricant needs, sources speculated, which has started to affect base oil requirements in some areas.

While a few base oil suppliers noted no impact on demand levels from the pandemic, others said that orders had been revised, or cancelled given a lack of demand from downstream applications, with market activity described as very subdued over the last week.

Even export activity, which had been fairly steady at the start of the month, was languishing, although shipments to Mexico continued. “Mexico is not fully shut down yet, but I think that will change soon. That said, business is falling off there as most of their industrial manufacturing is exported to the U.S.,” a source noted.

There was widespread speculation that U.S. producers would have to dial back operating rates in order to avoid overflowing inventories. “Refiners have been supposedly cutting back overall production due to lack of gasoline offtake/demand. This could maybe decrease base oil production indirectly,” a market source conjectured.

Finished lubricant consumption has suffered a significant decrease as industrial and automotive manufacturing has been suspended in some states due to the absence of workers, and the scarcity of raw materials and components, as shipments have been delayed, particularly those coming from China.

Shipping has also suffered a setback as operators have reduced the number of vessels covering certain routes given a lack of cargoes, or trips that were originally scheduled have been cancelled because of suspected infections on board of the vessels, sources said.

Most U.S. automakers have temporarily shut down operations at several plants, or might be switching to the manufacture of much needed medical equipment such as ventilators. Ford, General Motors and Tesla have all offered their resources to make ventilators to help alleviate a shortage amid the Covid-19 pandemic, according to media reports.

Meanwhile, the fight between Russia and Saudi Arabia to retain or conquer crude oil market share continued, and this, together with the grim economic prospects engendered by the impact of the Covid-19 pandemic, was exerting downward pressure on already depressed oil numbers.

However, on Tuesday, futures climbed on hopes that the U.S. would soon reach a deal on a $2 trillion coronavirus aid package to help offset the catastrophic economic effects of the pandemic. A surprising draw on U.S. crude inventories, which the American Petroleum Institute estimated to be 1.247 million barrels, also supported prices.

On Tuesday, March 24, WTI futures settled at $24.01 per barrel on the CME/Nymex, and had closed at $26.95/bbl on March 17. (CME Group closed its Chicago trading floor as a precaution on March 13; all products continue to trade on CME Globex)

Brent futures for May delivery were reported at $27.15/bbl on the CME on March 24, from $28.73/bbl on March 17.

Light Louisiana Sweet crude wholesale spot prices settled at $22.83/bbl on March 23 and had closed at $29.11/bbl on March 16, according to the Energy Information Administration.

Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.

Posted Paraffinic Base Oil Prices

March 25, 2020

(Prices are FOB basis, in U.S. dollars per gallon and U.S. dollars per metric ton).

Lubes’n’Greases Publications shall not be liable for commercial decisions based on the contents of this report.

Historic and current base oil pricing data are available for purchase in Excel format.