With lower feedstock costs at hand, it was only a matter of time before U.S. base oils producers would reduce posted prices, despite a fairly balanced supply/demand scenario, sources said.
Flint Hills Resources was the first out of the chute announcing it would decrease its lineup of API Group II neutrals by 20 cents per gallon and 25 cents/gal. HollyFrontier followed, moving its postings down by 25 to 45 cents/gal. Naphthenic giant Ergon also said it would lower its pale oils between 22 cents/gal and 26 cents/gal. Consumers expect other suppliers as well to announce plans to drop postings in the coming week.
Effective Tuesday, June 5, Flint Hills lowered its Group II 70/75 HC, 100 HC and 230 HC by 25 cents/gal, while the 600 HC cut eased by 20 cents/gal.
Today, June 6, HollyFrontier is adjusting its Group I base stock postings down. Solvent neutrals 70, 100 and 150 go down by 25 cents/gal, 250 and 525 vis shed 30 cents/gal, and bright stock looses 45 cents/gal.
Ergon announced that it would reduce all its pale oil prices between 22 cents/gal and 26 cents/gal on Thursday, June 7.
There was chatter in the marketplace that a few other price announcements are in the works, although no other price movements could be confirmed by press time.
Nevertheless, consumers anticipate that a widespread price drop is forthcoming, now that upstream costs have fallen well off their yearly highs. In fact, crude values have shed roughly 23 percent off highs reached in late February to early March.
Meanwhile, demand continues to be described as decent by suppliers, in spite of the summer holiday season now underway. Overall inventory positions on the production side are deemed balanced to tight, depending on grade and producer.
But there is a threat that availability could tighten further as Motiva heads into a planned downtime in July. This comes on top of Motivas unplanned outage on May 12 that caused an interruption in production and a subsequent sales allocation of 50 percent for Star 6.
The most recent financial meltdown in Europe – brought on by banking woes in Greece and Spain- has added pressure on the overall economic recovery there. The U.S. economy, which appears to be in better shape, has stalled however, in the face of the ongoing issues in Europe.
At the close of the Tuesday, June 5, CME/Nymex session, front month light sweet crude oil futures ended the day at $84.29 per barrel, an astonishing loss of $6.47/bbl from last weeks settlement at $90.76.
Brent crude was trading at $98.73/bbl at the end of the day yesterday, dropping a staggering $7.87/bbl from its week-ago level at $106.60. LLS (Light Louisiana Sweet) crude was trading at a premium of about $12.70/bbl to WTI on Tuesday.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.