May 2024 Price Corrections Emerge in US Base Oil Market as Supply Balances Demand

After a period of significant price increases in April 2024, the US Base Oil market witnessed a welcome shift towards stability in May 2024. This stabilization was attributed to several producer price adjustments for Base Oil. Following the initial surge in mid-April, recent weeks saw adjustments from major players like SK Enmove and Motiva. These adjustments involved price reductions for their Group II+ and Group III Base Oils, signaling a potential shift in the supply-demand dynamic. The earlier price hikes, particularly for Group I and Group II categories, were likely driven by rising crude oil costs and anticipation of increased summer demand. However, May saw a rebalancing act as supply in specific segments, like Group II+ and Group III Base Oil, appeared to catch up with demand which kept the balanced market scenario. Upstream crude oil prices, a key determinant of production costs, remained relatively unchanged throughout May. This stability helped prevent further upward pressure on Base Oil prices.

In the surprising turn of events, the Base Oil market remained unchanged throughout May 2024 to settle at USD 1915/MT Group II H600 and USD 1606/MT Group II H100, FOB Texas USA. Previously, the price hikes implemented in mid-April, ranging from 20 to 40 cents per gallon depending on the grade and supplier, still hold for many segments. This highlighted that the initial impact of rising crude oil costs and the anticipation of peak summer demand endured the trend wasn't uniform across all segments. Later, the price reductions from SK Enmove and Motiva for Group II+ and Group III Base Oils offer a glimpse into a potentially more stable pricing environment moving forward. These reductions suggested that supply in certain segments has grown and may now exceed demand, putting downward pressure on prices. However, the isolated nature of these reductions highlights the ongoing adjustments within the market. Partial shutdowns for maintenance at Motiva's Group II plant and Paulsboro's Group I unit caused a brief supply squeeze, especially for low-viscosity Group I and II oils. However, these were planned events, and Motiva has already resumed production, allowing them to rebuild inventories which stabilized the price trend for Base Oil.

As per ChemAnalyst, the Base Oil market is expected to rebound during June 2024 on the back of anticipated revived demand. Beyond regional patterns, it is projected that demand will increase globally due to the approaching summer driving season. Buyers will be looking for Base Oil to get ready for the anticipated rise in lubricant sales in the future months.