February – Market and Base Oil Updates

OUR OBSERVATION

Dear Readers,

Since our last newsletter, we have seen continued shifts in the North American base oil market, influenced by tightening supply conditions, shifting global trade flows, and ongoing refinery  maintenance schedules. As we navigate these evolving dynamics, market participants remain focused on balancing inventory levels, mitigating supply chain disruptions, and adjusting to changing crude oil trends. This month’s insights provide an in-depth look at these developments, along with key headlines and industry trends that are shaping the base oil landscape.

Market Overview
The North American base oil market navigated a complex landscape in February, marked by tightening supplies, shifting demand patterns, and geopolitical pressures affecting global trade. Group I base oils continued to experience constrained availability, particularly bright stock, as refiners allocated limited production toward higher-value products. Group II markets remained steady overall, with refiners preparing for upcoming maintenance turnarounds that could affect availability in the coming months. Group III oils, meanwhile, saw continued firm demand, particularly in the automotive and industrial lubricant sectors, where supply constraints persisted.

The U.S. market faced logistical challenges, with increased transportation costs and shipping delays affecting domestic distribution. Some refiners prioritized exports to Latin America and Asia, where demand remained strong despite regional economic uncertainties. In contrast, Europe continued to struggle with a supply overhang, leading to more competitive pricing strategies among suppliers.

Crude oil prices remained volatile throughout February, influenced by geopolitical tensions and fluctuating OPEC+ production strategies. Rising feedstock costs placed additional pressure on refiners, potentially impacting base oil pricing trends in the months ahead.

As the market moves into the second quarter, participants remain focused on balancing inventories, mitigating supply chain disruptions, and navigating an increasingly complex global trading environment.

RECENT HEADLINES

U.S. REFINERIES

U.S. Refining Margins Tighten Shifting Focus to Issuers’ Balance Sheets

Fitch Ratings’ report analyzes the anticipated decline in U.S. oil refining profitability due to reduced crack spreads in 2024, driven by sluggish global demand and ample supply. U.S. gasoline and diesel demand remains below pre-pandemic levels, with inventories high internationally but low domestically. The report highlights regional variations in refining margins, the impact of new global refinery capacities, and the influence of geopolitical factors such as reduced Russian exports. Continue Reading Here

U.S. Refining Capacity to Decline in 2025

The U.S. Energy Information Administration (EIA) expects U.S. refinery capacity to be 17.9 million barrels per day at the end of 2025, about 3% less than at the beginning of this year. In its November Short-Term Energy Outlook, EIA forecasts that after declining for several years, refinery margins (the difference between the selling price and the cost of production) for gasoline and diesel, known as crack spreads, will remain relatively unchanged in 2025. Continue Reading Here

Chevron reorganizes business structure, reshuffles leadership

Feb 24 (Reuters) – Chevron said on Monday it would reorganize some of its business structures and reshuffle the leadership team, the latest move by the U.S. energy major to simplify its operations. The company has said it would lay off up to 20% of its global workforce by the end of 2026, as it navigates cost overruns and delays in a large Kazakhstan project. Its $53 billion acquisition of Hess, has been stalled due to an arbitration battle with larger rival Exxon Mobil. Continue Reading Here

Aramco’s Motiva Expands Texas Refinery to Become Largest in US

Motiva Enterprises has quietly expanded its Port Arthur, Texas, refinery to become the largest fuelmaking plant in the US. The refinery can now process as much as 654,000 barrels of crude a day, more than the biggest US plants owned by ExxonMobil Corp. and Marathon Petroleum. Saudi Aramco-owned Motiva was able to increase Port Arthur’s capacity by removing bottlenecks in its processes, according to people familiar with the plant’s operations. Continue Reading Here

NON U.S. REFINERIES

Saudi Aramco to acquire 25% stake in Unioil Petroleum Philippines

SINGAPORE, Feb 20 (Reuters) – Saudi Arabia’s Aramco has signed an agreement to acquire a 25% equity stake in Unioil Petroleum Philippines, the company said in a statement late on Wednesday. The company, however, did not disclose financial details of the transaction. Established in 1966, Unioil is a downstream fuels operator with a network of 165 retail stations and four storage terminals in the Philippines, the statement said. Continue Reading Here

Exclusive: BP to ditch renewables goals and return focus to fossil fuels

Feb 24 (Reuters) – BP’s chief executive will scrap a target to increase renewable generation 20 fold by 2030, returning the focus to fossil fuels, as part of a strategy shift announced on Wednesday to tackle investor concerns over earnings, two sources told Reuters. BP’s shares have underperformed rivals in recent years and the oil major has already dropped its target to cut oil and gas output by 2030, Reuters reported in October. Continue Reading Here

Reports: Pressure is on bp to merge with Shell, creating a British oil giant

Leading investment bankers are looking to engineer a merger between bp and Shell to create one national British oil and gas champion, The Mail on Sunday has reported. The Mail on Sunday is a tabloid British newspaper and a sister publication to the Daily Mail. According to the report, the aim is to bring the two oil majors together so they can compete with international rivals such as France’s TotalEnergies and US majors ExxonMobil and Chevron. Continue Reading Here

THE CRUDE SIDE

Oil Prices Rise Amid Potential Global Supply Changes

Oil prices increased as traders monitored potential changes to global supply flows, including negotiations to end the Russia-Ukraine conflict and reports of Iraq resuming oil exports from its Kurdish region. Continue Reading Here

OPEC+ Risks Losing Control with Output Delays

OPEC and its allies face a strategic decision on whether to lift oil production caps amid uncertain market conditions, as repeated delays and internal tensions challenge the group’s market stability
efforts. Continue Reading Here

U.S. Imposes Additional Sanctions on Iranian Oil Trade

The United States imposed sanctions on numerous individuals and vessels across several countries for allegedly financing Iran and supporting militant groups, aiming to reduce Iran’s oil exports to zero. Continue Reading Here

Arctic Blast Sends Natural Gas Prices to Two-Year High

 Natural gas futures reached a two-year high due to an Arctic blast increasing demand and impacting production in the U.S., while oil futures saw modest gains supported by reduced Russian supply and efforts to resolve the Ukraine conflict. Continue Reading Here

FUN FACTS – THE EVOLUTION OF LUBRICANTS

Did you know that the earliest lubricants were derived from animal fats and beeswax? Ancient civilizations, including the Egyptians and Romans, used these natural substances to reduce friction in machinery, chariots, and even pyramid construction. Over time, the discovery of crude oil led to the development of petroleum-based lubricants, revolutionizing industrial applications. Today,
advanced synthetic lubricants enhance efficiency in everything from automotive engines to aerospace technology, showcasing the ongoing innovation within the oil and gas industry.