Buyers and sellers agree that the U.S. base oil market is quiet this week, but with both crude and fuel prices sinking, some buyers are pressing for lower base oil prices, too. Opinions are mixed about ExxonMobils Group I pricing; some buyers contend the market leaders last price hike was unwarranted, while others see a too-tight Group I market, giving the market leader no incentive to lower prices.
Group II producers Motiva and Flint Hills Resources decisions not join the latest round of posted price increases,triggered by ExxonMobil in early August, leave these companies looking prescient, although some observers say Motivas successful turn-around probably has them longer on supply, so less likely to raise prices.
Only Calumet raised posted Group II-plus prices, and Group III postings remained unchanged during the last round of increases.
One buyer disputes ExxonMobils arguments for raising prices in early August, calling its rationale highly questionable. ExxonMobil had cited low inventories, supply/demand and refining margins when it last raised prices. But the unhappy buyer claims the DOE inventory data was months out of date; demand has dropped with the end of the summer driving season; and margins have collapsed with plummeting gasoline and heating oil prices.
On the other hand, another observer says theres more Group II than Group I in the market now, and ExxonMobil is sold out of everything. If their tanks were full, it would be different. Theres no incentive to lower prices when theyre selling every gallon.
With crude and fuel prices dropping so quickly, buyers say it isnt rocket science to expect base oil prices to follow. But, a buyer cautions, a hurricane in the Gulf means all bets are off.
U.S. posted prices for paraffinic base oils were unchanged again this week. The cost of crude oil on the New York Mercantile Exchange closed yesterday at $63.67 per barrel, according to Bloomberg. That was $4.84 lower than the price a week earlier.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.