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Base oil prices move up - 2nd time in 2022

In a second round of base oil price increases in 2022, ExxonMobil announced last Thursday that the price of its base oils will increase by $0.30 a gallon, effective March 14. Excel Paralubes announcement followed with and effective date of March 9. Excluding Group III, recently announced base oil price increases are shown to the right.

The base oil increases come as no surprise in light of the skyrocketing price of crude oil. Although demand for base oils in the US is soft due to painfully tight supply of additives hampering the ability of blenders to meet growing demand for finished lubricants, it’s well understood that the price of base oil is also influenced by the price of diesel. And with diesel fuel prices in some locales selling for over $5.00 a gallon, the alternative value of using vacuum gas oil as cracker feed for fuel production puts pressure on base oil prices as both fuel and base oil businesses compete for the VGO. 

Impact of Russian base oil on the US market

Sanctions are expected to have minimal direct impact on base oil supply in the US market. This is because while some Group II flowed into the US from LUKOIL’s Volgograd refinery and Group I from other locations in Russia, the volume was historically low due to variability in specifications and lack of approvals. 

Indirectly, however, a knock-off effect will likely be seen over time as Europe and West Africa turn to supply from Saudi and other countries in an effort to manage the spigots from Russia being shut off by sanctions. This could pull down on US base oil supply and put addition upward pressure on base oil prices. 

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