In the views of blenders and distributors JobbersWorld spoke with, the increases are unexpected and perplexing. Although the price of crude oil has been trending up for the last six weeks, demand for lubricants remains relatively soft and word on the street is that base oil supply is long.

At the same time, concern remains that the upward trajectory of crude oil prices will continue due to falling inventories and this could push base oil prices even higher as we approach 2024. The drop in inventories is, in part, a function of deep production cuts in Saudi Arabia and record high demand in some regions of the world.

The spread between the price of base oil and diesel fuel is also adding questions as to why we are now seeing the price of base oil increase. While vacuum gas oil (VGO) is the feed used to produce base oils, VGO has alternative value as cracker feed to produce diesel fuel. This puts pressure on base oil prices as both fuel and base oil businesses compete for the VGO. But, as shown in the chart below, the wholesale diesel fuel-base oil price spread has widened over the past two years.