- Home
- About Us
- Newsletter
- Americas
- EMEA
- Asia
- Market Signals
- Companies
- News
- Weekly Magazine
US base oils producer prices recorded their largest monthly increase in more than a decade in May even as crude oil prices declined
Lubricants prices rose at their fastest pace since 2011 but continued to lag feedstock costs, increasing pressure on blender margins
The sequence — energy costs first, base oils next, lubricants last — pointed to the disruption working through the supply chain in stages, with full synthetic and low-viscosity engine oils likely to be among the last to see relief
US base oils producer prices recorded their fastest monthly increase in more than a decade in May even as crude oil prices fell, highlighting how a structural shortage of premium-grade supply continued to drive lubricant feedstock costs higher.
The producer price index (PPI) for base oils rose by 57% in May from April and for a fourth consecutive month, reaching its highest level since October 2022, Bureau of Labor Statistics data showed.
The increase was the largest month-on-month rise in percentage terms in more than a decade.
The crude oil and heating oil and distillates PPI also extended their rise in May, but at a slower pace than base oils.
The divergence pointed to different stages of the same supply shock.
Crude oil prices had already started to retreat in April, but shortages of Group III base oils continued to push feedstock costs higher.
The finished lubricants PPI also continued to rise but its pace lagged the May surge in base oils, leaving blenders under growing pressure to pass higher costs through to end-users.
Key Highlights
· The base oils PPI rose by 84% during the three months to May, outpacing gains in crude oil, heating oil and lubricants.
· The finished lubricants PPI rose for a third straight month to its highest level in more than a decade, with the monthly increase the largest since 2011.
· Crude oil and distillates saw their largest PPI increases in March, with smaller gains in April and May.
· Base oils and lubricants followed the opposite pattern, with smaller increases in March and April before a surge in May, underscoring the lag effect.
Market Repercussions
Base oils prices continued rising after crude oil prices had already started to retreat, reflecting both the typical delay between crude and feedstock pricing and tighter Group III supply conditions.
The larger rise in the base oils PPI also coincided with a surge in global Group III base oils prices that reflected the physical shortage of the product.
That ongoing shortage was likely to slow the pace of a subsequent drop in base oils prices even as crude oil prices extended their slide through June.
The disconnect between the size of the rise in base oils PPI and finished lubricants pointed to a similar lag effect and the prospect of further increases in lubricants prices to narrow the difference.
The smaller increase in the lubricants PPI could also reflect the difficulty that blenders faced in passing on higher costs to end-users, leaving them facing greater margin pressure.
The pattern pointed to a supply shock that was still moving through the value chain. Crude oil prices had already begun to retreat, base oils prices were still catching up, and lubricants prices had yet to fully reflect higher feedstock costs.
