May – Market and Base Oil Updates

OUR OBSERVATION

Dear Readers,

Since our last newsletter, the base oil landscape has been shifting like spring winds across the Gulf Coast. Planned maintenance schedules have continued to create pockets of reduced output, but this time around, buyers aren’t scrambling—they’re calculating. The talk of the month hasn’t been about a frantic race for supply but rather a cautious navigation through tariff noise, freight volatility, and soft downstream demand. With many taking a “wait and watch” approach, May has felt like a market catching its breath rather than leaping ahead.

In this issue, we take you through the nuanced shifts across Group I, II, and III grades, and examine how North American trends are holding up against the broader global picture. Let’s dig into what’s unfolding—and what might be brewing just over the horizon.

Market Overview

May’s base oil market across North America has been marked by restraint rather than reaction. Group I availability remains selective, especially for bright stock, which continues to draw strong interest from Latin American and West African buyers. But despite the steady export demand, refiners are still navigating operational constraints from earlier outages. With no major resurgence in domestic demand, most suppliers are prioritizing strategic allocation over volume growth.

Group II grades tell a tale of tactical buying, not booming consumption. Much of the purchasing this month has been anticipatory, triggered more by trade uncertainty than real downstream demand. Buyers are mindful of tariffs and freight costs, placing orders to stay ahead of any policy swings—but keeping volumes tight. Refiners with healthy inventories are nudging material into the market through select discounts, but fundamentals haven’t justified broader pricing movement. One major oil opted to adjust postings downward in anticipation of increased volume after a key turnaround, signaling a strategic move to stay ahead of shifting supply dynamics.

As for Group III, the market is neither tight nor oversupplied—it’s balanced. Imports from the Middle East and South Korea have remained consistent, with no major logistical hiccups or supply shocks to speak of. However, demand has stayed sluggish, particularly from the automotive and industrial lubricant sectors. Sellers of unapproved barrels are trimming offers to stay competitive, while premium-approved grades remain steady, albeit with a slower sales pace than earlier in the year.

On the logistics front, Gulf Coast freight congestion has slightly eased, but reliability remains a concern. Inland transportation remains sensitive to seasonal shifts, and buyers are taking few chances. The overall sentiment? Stable—but tentative. Eyes are now on the back half of Q2 to reveal whether we’re in for a quiet summer or the setup to something bigger.

RECENT HEADLINES

U.S. REFINERIES

Exxon Mobil to sell French subsidiary Esso to Canadian energy group

Energy major ExxonMobil has entered into exclusive negotiations with the French unit of Canadian energy group North Atlantic to divest its majority-owned French subsidiary Esso, it said on Wednesday.

The sale is expected to take place in the last quarter of this year, at a price of 149.19 euros ($168.82) per Esso share before distributions, or 32.83 euros after distributions, Esso said in a statement. Those include an additional distribution of up to 63.36 euros per share ExxonMobil aims for Esso to make prior to completion of the transaction, Esso said.

Exxon is currently the majority shareholder in Esso, with a 82.89% stake, which it plans to divest entirely. Following the acquisition, North Atlantic would make a mandatory takeover bid for the remaining shares of Esso on the same financial terms as the initial offer, Esso said.

It said that the tender offer is expected to be filed in the first quarter of 2026. Continue Reading Here

Phillips 66 to Lay Off Most Workers at Los Angeles Refinery

U.S. refining giant Phillips 66, which will close its LA refinery later this year, will lay off in December most of the workers at the plant, Reuters reports, citing sources with knowledge of the plans. Last October, Phillips 66 said it would shut down its refinery in the Los Angeles area in the fourth quarter of 2025, due to “market dynamics.”

Approximately 600 employees and 300 contractors currently operate the Los Angeles-area refinery, Phillips 66 said when it announced the closure. “We understand this decision has an impact on our employees, contractors and the broader community,” Mark Lashier, chairman and CEO of Phillips 66, said in October. Continue Reading Here

Marathon reports smaller-than-expected loss despite refinery downtime

May 6 (Reuters) – Marathon Petroleum (MPC.N), swung to a loss in the first quarter, but performed better than Wall Street expected, as the biggest U.S. refiner navigated a period of elevated maintenance and industry-wide turnaround activity.

The results reflected the second-largest planned maintenance quarter in its history, the company said on Tuesday. “We completed significant planned turnaround activity in the quarter, particularly in our Gulf Coast region, where utilization decreased from 97% in the fourth quarter of last year to 82% in the first quarter,” said Chief Financial Officer John Quaid during a conference call with analysts. Continue Reading Here

Saudi Aramco to Spend $3.4B on Motiva Refinery in Texas

Saudi Aramco plans to spend $3.4 billion on its Motiva refinery in Texas, the largest fuel making plant in the U.S. The Saudi oil giant announced the project soon after Donald Trump arrived in Riyadh on his first scheduled trip abroad since returning to power. The American president, who’ll also visit Qatar and the United Arab Emirates, wants the energy-rich Gulf states to ramp up investments in the U.S. and buy more of its goods.

At the Motiva plant, Aramco will integrate petrochemicals production with fuels output, CEO Amin Nasser said at a forum in the Saudi capital. The company will sign a deal later May 13, he said, without giving further details. It wasn’t immediately clear whether the work would also increase crude-processing capacity. Continue Reading Here

NON U.S. REFINERIES

BP seeks buyers for Castrol lubricants unit to reach $20 billion divestment goal, sources say

LONDON, May 22(Reuters) – BP (BP.L), has kicked off the sale of its more than a century-old Castrol lubricants business, according to two people with knowledge of the process, in a key step in the British energy group’s divestment plan to boost its share price.

BP hired investment bank Goldman Sachs to sell the unit, the sources said, speaking on condition of anonymity because the matter is private. The group has already contacted potential private equity and strategic bidders and distributed an information memorandum to them, one of the people said. Continue Reading Here

Saudi oil giant Aramco posts 5% dip in first-quarter profit on weaker crude prices

Saudi Aramco’s first-quarter net profit fell 5% year-on-year amid lower oil prices and production. Net income for the three months to March 31 came in at $26 billion, down from $27.3 billion for the same period last year, the company reported. The figure was slightly above analyst expectations of $25.3 billion.

Aramco announced its free cash flow for the quarter at $19.2 billion, down from $22.8 billion in the first quarter of 2024, and cash flow from operating activities at $31.7 billion compared to last year’s $33.6 billion. Continue Reading Here

THE CRUDE SIDE

U.S Offshore Oil Production Set To Jump

U.S. energy executives are forecasting a significant increase in offshore oil production under a potential second Trump administration, attributing this to streamlined permitting processes, sustained investments, and technological advancements. The Gulf of Mexico’s output is projected to rise from 1.8 million barrels per day (bpd) to 2.4 million bpd by 2027, according to estimates from the U.S. Energy Information Administration (EIA) and the Bureau of Ocean Energy Management (BOEM).

While shale oil offers flexibility, its growth is expected to plateau, prompting companies to focus more on offshore drilling. The Trump administration’s commitment to expediting oil and gas project approvals on federal lands is anticipated to further bolster offshore activities. Continue Reading Here

OPEC+ Takes Aim at U.S. Shale, Again

This week, media reports said OPEC+ could announce yet another bigger than initially planned production hike at its next meeting. On the face of it, the goal is getting quota laggards Iraq and Kazakhstan in line. The other goal, according to a new Reuters report, is to try and kill U.S. shale, again.

The oil-producing club took U.S. shale on about a decade ago, turning the taps all the way and flooding the market with oil. Prices crashed. So did a lot of shale drillers at the time. Yet the ones that survived got better at getting the oil out of the shale formation cheaper—and they started taking market share from OPEC. Ten years on, U.S. shale production still features higher costs than conventional wells in Saudi Arabia overall, but the industry has come a long way since 2014 and has made significant gains in cost control and efficiency. Continue Reading Here

Fun Facts About the Lubricants Industry

1. Lubricants Are Older Than You Think

Ancient Egyptians used animal fats and vegetable oils to reduce friction when moving massive stones—an early version of industrial lubrication!

2. Only a Small Slice of the Barrel

Only about 1%–2% of a barrel of crude oil ends up as base oils for lubricants—but that small slice supports everything from Industrial Manufacturing to lipstick factories.

3. Lubes in Space

NASA uses custom-designed synthetic lubricants that can function in the vacuum of space and at extreme temperatures—where traditional oils would vaporize or freeze.

4. One Drop, Big Impact

A single drop of high-quality lubricant can reduce friction by up to 50%, dramatically extending the life of engines and machinery.

5. Racing Secret Weapon

In motorsports, formulated racing lubricants give engines an edge by reducing heat and metal wear, sometimes gaining extra horsepower through friction control alone.

6. Not Just for Engines

Lubricants are used in everything from food processing to wind turbines to textile production. There are even biodegradable lubes for eco-sensitive environments.

7. Synthetic Oils Started in WWII

The first synthetic lubricants were developed by Nazi Germany in WWII as a workaround for crude oil shortages. Today, they’re prized for superior performance in extreme conditions.

8. Custom-Made Chemistry

Modern lubricants are more than oil—they’re a cocktail of detergents, dispersants, anti-wear agents, antioxidants, and viscosity modifiers tailored to specific applications.

9. Lubes Save Fuel

Using high-performance lubricants can increase fuel economy by 2–3% in cars and heavy-duty vehicles—small savings that add up fast in fleets.

10. Huge Global Market

The global lubricants market is worth over $120 billion, driven by automotive, industrial, and marine sectors—with Asia Pacific leading demand.

11. Grease Is a Lubricant, Too!

Greases are made by thickening base oils with soap-like agents, making them perfect for applications where liquid oils would drip or run off.

12. Base Oil Groups Matter

Lubricants are formulated from different API Group I–V base oils—ranging from traditional solvent-refined oils to high-purity synthetics.