Phillips 66 will be decreasing its Group II+ Ultra S2 and Ultra S3 cuts, and its Group III Ultra S4 and Ultra S8 grades 15 cents/gal, with an effective date of March 2.

These movements come on the heels of posted price decreases by a majority of Group I, II and II+ suppliers.

The Group I decreases ranged 15 cents to 20 cents per gallon, and the Group II adjustments called for price drops of 10, 15, 20, 22, and 25 cents/gal, depending on the cut and the producer.

According to sources, ExxonMobil had lowered its Group II cut 20 cents/gal and its Group II+ cut 15 cents/gal.

However, it was heard that ExxonMobil informed a select number of buyers that the Group II EHC65 cut (230 vis), which was originally marked down 20 cents/gal, would move up 5 cents/gal as of Feb. 26, basically resulting in a net decrease of 15 cents/gal. The producer had also notified its customers that it reserved the right to adjust prices at a later date when the decreases first surfaced.

Suppliers had hoped the latest markdowns would stimulate demand, a couple of sellers acknowledged that, while there had been a slight uptick in orders, they did not expect a significant jump in requirements as many consumers hold adequate inventories.

Furthermore, there is no shortage of base oils within the domestic supply system, and there have been many price adjustments of late, so buyers are taking longer than usual to place orders.

In general, most base oil players agree that finished lubricant demand is expected to remain fairly flat, or increase only slightly in the next few years, and as a result, base oil requirements are also expected to see little growth.

Given recent global capacity additions in the base oils arena, the current supply glut is anticipated to continue weighing down on fundamentals, and recent and upcoming permanent plant closures – mostly involving Group I production – are not expected to be sufficient to establish a supply/demand balance.

However, weakening crude oil and base oil prices, together with oversupply conditions, have resulted in several new base oil production projects either being delayed, or cancelled altogether, noted Stephen Ames, managing director of SBA Consulting, at a recent industry event in London.

According to Ames, in North America, five rerefiners have cancelled plans to open base oil plants in the United States, while HollyFrontier has delayed its announced capacity addition at Woods Cross, Utah, originally expected to come on-stream in 2017.

Sasol has also delayed the construction of its gas-to-liquids (GTL) refinery and base oil plant near Lake Charles, La., indefinitely. The plant was originally anticipated to be completed in 2020.

In Mexico, Pemex was not expected to complete the expansion of its Salamanca plant until around 2020, instead of 2017 as had been the original plan.

Upstream, West Texas Intermediate futures climbed on Monday after China implemented new policies to boost its economy, and Saudi Arabia pledged to work with other crude producers to limit market volatility.

A Reuters poll also showed that the Organization of the Petroleum Exporting Countries produced less crude in February than the previous month, bolstering market sentiment.

WTI settled on the CME/Nymex at $34.40 per barrel on March 1, up $2.53/bbl from its Feb. 23 settlement of $31.87/bbl.

Light Louisiana Sweet wholesale spot prices closed at $35.09 on Feb. 29, compared with $34.25/bbl on Feb. 22, according to data from the U.S. Energy Information Administration.

Brent was trading at $36.81/bbl on the CME on March 1, up $3.54/bbl from $33.27 a week earlier.

Please note: Calumet decreased its paraffinic base oils, not its naphthenic oils as mentioned in an early version of the Feb. 24 edition of Lube Report.

Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.