The US base oil prices exhibited a notable period of price stability throughout January 2025. The rising feedstock crude oil prices and the anticipation of potential tariff increases might have created an environment of uncertainty which could drive base oil prices upwards, a delicate balance of supply and demand dynamics ultimately prevailed.

Key Takeaways:

• Increased base oil exports by US suppliers and strategic production adjustments by domestic manufacturers despite unplanned shutdown at the Excel Paralubes Group II/III unit in Lake Charles, Louisiana.
• Weak demand from the downstream lubricant market limited buying activity and mitigated any potential supply-driven price increases.
• While some manufacturers stockpiled materials, the anticipated rush to secure supplies failed to materialize, preventing significant base oil price fluctuations.

While the group II base oil prices maintained immense stability during January 2025, this trend is likely to stay in the upcoming weeks amid the base oil orders slow down significantly leading up to the year-end holidays and are not expected to rebound until mid-January or early February.

One significant factor contributing to this stability was the ample domestic supply of base oils. US suppliers had been actively increasing their export volumes, effectively flooding the global market. This increased supply exerted downward pressure on prices, mitigating any potential for significant price increases within the domestic market.

However, certain grades experienced tighter supply conditions, due to factors such as production adjustments by manufacturers to avoid oversupply. These production adjustments were strategic moves by manufacturers to maintain market equilibrium and prevent potential price volatility arising from overproduction.

Moreover, an unplanned shutdown at the Excel Paralubes Group II/III unit in Lake Charles, Louisiana, in November led to a temporary tightening of short-term spot supply for Group II base oils. While the plant was expected to restart operations by the end of the year, the incident caused a temporary reduction in available supply and no additional support has been provided. Furthermore, the continuous surge in the feedstock Crude oil prices further increased the manufacturing costs during this timeframe.

Nevertheless, a noticeable slowdown in base oil orders was observed in the weeks leading up to the year-end holidays, contributing significantly to the subdued demand environment. This reduced demand activity further dampened any potential upward pressure on prices.

Weak demand from the downstream lubricant market significantly limited buying activity. While some buyers proactively placed orders, the subdued market demand prevented this behavior from translating into significant price increases. Moreover, industry participants showcased a decline of 6-8% in base oil consumption compared to the last year.