March 2024: Spring Demand Hopes Revival of US Base Oil Market, Despite Price Concerns

In a surprising turn of events, after the announcements of price increases from major players like ExxonMobil and Paulsboro, the Base Oil prices had increased last week. However, during the first half March 2024, the US Base Oil market stabilized as the negotiations were still ongoing and this wait-and-see approach due to uncertainty about demand and a desire to get a clearer picture of the market kept the Base Oil prices stable. Previously, rising feedstock crude oil prices and supply constraints due to plant turnarounds had put upward pressure on Base Oil prices. Additionally, disruptions in the Panama Canal and increased shipping costs from alternative routes like the Cape of Good Hope contributed to the price rise. However, even though spring is approaching, demand hasn't picked up as much as expected. This has led some to question the proposed price hikes, especially since demand for finished lubricants hasn't significantly improved.

ExxonMobil and Paulsboro announced price increases as a knock-on effect, and several producers also thought about adjusting prices in reaction to these circumstances. While ExxonMobil allegedly raised the quoted price of its API Group I, Group II, and Group II+ Base Oil during the week ending 1st March, Paulsboro also plans to raise the quotation in the latter week. Although the biggest firms had posted price increases, negotiations were still ongoing because at least one of the producers was offering temporary value allowances for the entire rise, and other customers were anticipating a delay in the implementation of the hikes of Base Oil. On the contrary, it was still unclear whether this spring season would see a larger demand for Base Oil than it did last year. They were therefore anticipated to hit the market again ahead of the hectic spring production period. Some suppliers reported that orders had begun to trickle in, while others witnessed little change in activity from a few weeks prior. Henceforth, in a wait-and-see approach, manufacturers and suppliers are holding off on price changes until they have a clearer picture of market sentiment which results in a balanced market trend to settle at 1790 USD/MT Base Oil Group II H600 FOB during first half of March 2024.

As per ChemAnalyst, the US Base Oil market is estimated to rebound in the second half of March 2024`` as more suppliers anticipate better business amid increased demand from the spring season. Shipments from Asia are also expected to be affected by multiple delays which could result in a higher freight charge. This could affect not only the affected routes but also other shipments as vessel space have been limited.