January Base Oil Report

WPB: The base oil market in 2025 is set to undergo notable transformations, shaped by evolving policies, advancements in technology, shifting demand patterns, sustainability goals, and the introduction of new product requirements. Industry participants are preparing for a year of significant adjustments.

End-of-Year Trends in 2024

The close of 2024 unfolded largely as anticipated. Expanding inventories, weakened demand, and lower crude oil and feedstock prices prompted most base oil manufacturers and rerefiners to implement price reductions between October 21 and November 25. These cuts ranged from 15 to 50 cents per gallon, depending on the supplier and product grade. Exceptions included API Group I bright stock and ExxonMobil’s Group II 220 neutral grade. While ExxonMobil and Paulsboro revised prices for some Group I products, other producers in this category maintained stable rates due to well-balanced inventories and earlier price changes in September.

Such pricing adjustments are common at the year’s end, as demand typically softens following a busy spring and summer season. Additionally, suppliers often aim to clear inventories held for hurricane season, which officially ends on November 30, by offering competitive posted and spot prices.

Downstream Market Dynamics

In the downstream sector, intense competition among lubricant manufacturers striving to retain or grow market share exerted downward pressure on lubricant, grease, and finished product prices. Several factors contributed to reduced base oil demand, including extended oil-change intervals for newer vehicle models, the gradual adoption of electric vehicles, and economic pressures delaying oil changes—particularly for heavy-duty vehicles and agricultural machinery. Blenders reported an 8%-10% drop in lubricant demand compared to 2023, which had already seen significant declines relative to 2020 levels. The steepest reductions were observed in the first quarter of 2024.

Supply Conditions Across Base Oil Groups

While Group I products ended 2024 with a stable supply-demand balance, Group II inventories began to lengthen as additional shipments entered the market. However, a late-November shutdown of the Excel Paralubes Group II/III facility in Lake Charles, Louisiana, temporarily tightened supplies. Chevron’s planned maintenance at its Group II plant in Pascagoula, Mississippi, during the first quarter of 2025, coupled with pre-maintenance inventory stockpiling, may further restrict Group II spot availability.

Group III base oil prices, on the other hand, stabilized in late November and early December due to reduced production at domestic facilities and hesitancy among suppliers to implement additional price changes. Competitive pricing between Group II and Group III products spurred interest in the latter, with most cuts considered widely available. Ample supplies were expected to continue, supported by imports from South Korea and the Middle East.

Export Market Opportunities

Domestic base oil demand was not anticipated to rebound significantly before the first quarter of 2025, prompting suppliers to focus on export markets. While trade with Mexico remained steady, U.S. suppliers acknowledged a decline in shipments of light-viscosity grades due to Mexican government restrictions on base oils used as fuel extenders. However, premium-grade shipments for factory-fill applications continued, bolstered by Mexico’s expanding automotive manufacturing sector. Exports to Brazil and India were expected to increase in December and January, driven by restocking needs and attractive U.S. pricing.

Naphthenic Base Oils and Sustainability Trends

On the naphthenic side, price pressure was less pronounced compared to paraffinic oils due to balanced supply conditions, particularly for light-viscosity grades. Crude oil price volatility influenced costs but was offset by stable demand from sectors such as transformer oil production and infrastructure projects. Heavier pale oil grades, though more abundant due to reduced seasonal demand from tire and rubber industries, saw producers maintaining firm price levels in anticipation of tighter market conditions in 2025. Sustainability initiatives continued to drive interest in rerefining, with government policies and private investments supporting circular economy goals. Experts emphasized the need for stronger mandates on used oil recycling to encourage further investments in the U.S.

By Bitumenmag

Base Oil, Oil, Bitumen, Petroleum, Price