Some participants thought the decrease reflected softer fundamentals in the Group II+ and Group III segments, particularly as several import cargoes were expected to arrive over the next few weeks, but other players noted that they had not seen much length in the Group II+ sector – with the exception perhaps of rerefined volumes. They also said that within the Group III segment, the 4 cSt was slightly long due to fresh Asian and Middle Eastern imports, but the 6 cSt and 8 cSt grades were more balanced. Even so, there were expectations that demand for 4 cSt would increase as the spread between this grade and the Group II 100N has narrowed, encouraging consumers to use more of the premium grade whenever possible.

The Group I segment continued to be assessed as balanced-to-tight, with limited extra barrels offered for spot business. Group II base oils were generally snug, although there was more availability of the heavier grades and this exerted pressure on prices. Spot prices for these grades were adjusted down between 3 cents per gallon and 10 cents/gal week on week as availability was growing and demand was not anticipated to pick up any time soon. Group I bright stock managed to avoid any downward revisions given that it remained fairly tight and demand for this grade was steady.

An API Group I/Group II producer was heard to have suffered an unexpected production issue which resulted in one to two weeks’ maintenance. The producer was understood to have restarted its base oils unit and was expected to meet contractual obligations, but suspend spot offers.

The three-week turnaround at Chevron’s Group II/Group III unit in Richmond, California, taking place this month was not expected to impact base oil availability significantly as the producer has likely built inventories ahead of the shutdown, although sources said they had observed some market tightening of the Group III grades produced at that plant. Chevron was also understood to be planning to take its Pascagoula, Mississippi, plant off-line for three weeks in the first quarter of 2025. There was no confirmation about the turnaround schedule as the producer does not comment on the status of its base oil operations.

Aside from SK’s initiative, there were no additional posted price adjustments reported, with players monitoring market fundamentals and feedstock prices closely as these remained volatile. Crude oil values have registered a significant drop since earlier in the month, driven by developments related to the Israel-Hamas war, a forecast by the International Energy Agency of a likely oil glut in 2025, and disappointing economic data from China – the world’s top crude importer.

However, earlier this week, oil prices began to rise, settling higher for the second consecutive session on Tuesday as hopes for a ceasefire in the Middle East receded and more optimistic prospects of demand in China emerged.

On October 22, WTI December 2024 futures settled on the Nymex at $71.74 per barrel, compared to $70.58/bbl for November futures on October 15.

Brent futures for December 2024 delivery were trading on the ICE at $75.60/bbl on October 22, from $74.52/bbl on October 15.

Louisiana Light Sweet crude wholesale spot prices were hovering at $72.89/bbl on October 21, from $71.50 on October 18.

Low sulfur diesel at New York Harbor was at $2.17/gal and at $2.12/gal on the Gulf Coast on October 21, according to the Energy Information Administration.

On the naphthenic side of the market, participants were also keeping a close eye on crude oil and diesel values. No widespread price adjustments have emerged, following a 20 cents/gal decrease introduced by a majority of naphthenic producers in late September, but those accounts that have contracts tied to a diesel index may have seen additional decreases as diesel prices have weakened.

Demand for the lighter grades was deemed healthy, offering support to steady pricing. Buying interest from Europe and Latin America, fueled by snug supplies, allowed domestic producers to keep inventories in check. The heavy grades have become more plentiful because of a slowdown in the tire and rubber segments as the U.S. driving season has ended, although an uptick in travel activity was expected during the U.S. Thanksgiving holiday in late November.

Export demand for paraffinic base oils has declined as U.S. prices were considered too high to compete at certain destinations such as India. While India typically attracts significant volumes of U.S. Group II base oils during the last quarter of the year, when suppliers release extra stocks kept during the hurricane season and many of these barrels find their way into the export market, this year the amount available may be smaller as the U.S. domestic market is tighter. An unexpected brief production shutdown at a Group I/Group II plant and steady demand for the light grades–the Group II 100 neutral in particular–has limited the expected surplus.

Buyers in markets such as Mexico and Brazil were willing to wait until U.S. prices fall further, as suppliers were expected to release additional volumes ahead of year-end to avoid bulging inventories and tax repercussions. Blenders in these countries appeared to have requirements well-covered for the next few weeks. Demand from some countries in South America, including Argentina, seems to have declined on economic uncertainties and unfavorable currency exchange rates, although the Argentine government has kept the official exchange rate of the local currency against the U.S. dollar at a fixed level. In upcoming shipments, a 5,000-metric-ton base oil cargo was expected to be lifted in Ulsan, South Korea, for Rio de Janeiro, Brazil, in mid-November. In terms of recent imports, about 3,500 metric tons to 6,000 tons were expected to be shipped from Yanbu, Saudi Arabia, to Port Arthur, Texas, in mid-October.

Meanwhile, inventories of finished products remained plentiful because consumption from key segments such as the automotive industry has declined following the end of the driving season and increased sales of electric, hybrid and conventional fuel-efficient vehicles with longer drain intervals. Demand from the industrial segment was comparatively more robust, but it has started to decline from the agricultural segment as cold winter weather was approaching in large parts of the U.S.

Participants reported that some of the major lubricant manufacturers had offered hefty discounts to place additional volumes, exerting pressure on pricing. Blenders had struggled to offset base oil price increases implemented back in April, and had seen some relief through the recent round of posted price decreases in September, but these did not appear to be enough as production costs remained high, squeezing margins. Lubricant manufacturers were hoping to secure discounts from additive suppliers given the decrease of base oil posted prices in September, and some players appeared to have been successful in their quest.

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

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

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