The likelihood of price increases for U.S. base oils appears to be growing, according to both sellers and buyers. Industry sources say buoyant crude oil costs have made base oils ripe for another round of markups. The only question, they say, is when.
The market has already undergone four rounds of price hikes this year, but the last came at the end of August. Since then, crude oil costs have risen from less than $28 per barrel to more than $30 per barrel, driving base oil refining margins to between 5 cents and 7 cents per gallon below their averages for the past two years.
Crude costs have hovered around $30 per barrel for the past six weeks, with prices on the New York Mercantile Exchange dropping 31 cents yesterday to $29.72. Sources say those margins have been tight enough long enough to override supply-demand balance as a force controlling prices.
Im just kind of waiting for the shoe to drop, one purchaser said. I keep trying to come up with arguments against a price increase, but Im finding them few and far between.
As the markets dominant supplier, ExxonMobil typically sets the pace for base oil price movements. Buyers and sellers agreed that the annual meeting of the Independent Lubricant Manufacturers Association two weeks ago may have helped stave off a price hike; observers believe ExxonMobil abstains from movements immediately after industry meetings to avoid the appearanceof collusion. As that meeting recedes further into the past, it removes one more reason for prices not to increase.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.
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