At first it appeared the U.S. market had a hard time rolling back into action following the extended July 4thcelebratory weekend. But on Tuesday, Motiva gripped the industrys attention with its plans to increase its line-up of API Group II and II+ postings between 20 to 35 cents per gallon.
In the Group II category, Motiva said it plans to raise its Star 3 (70 viscosity) by 30 cents/gal, up its Star 4 (105 vis) posting by 35 cents/gal, lift Star 6 (220 vis) by 25 cents/gal and bolster Star 12 (600 vis) by 30 cents/gal. Group II+ Star 5+ will climb by 20 cents/gal. The Motiva increases will become effective Friday, July 10, the company said.
Whether other producers will jump on board and follow the Motiva move remains uncertain at this point.
The price advancements that were announced by Valero and Holly within the last two weeks initially appeared to represent a possible fresh round of price movements. But sources surmised that those adjustments were – at least to some degree – a catch-up to posting changes initiated by other suppliers in early-to-mid June.
A large consumer said it was interesting that Group II postings were at such a premium over those for Group I. The source indicated that in reality there was little difference in net prices between Group I and II, after volume discounts are taken into consideration.
Although market activity remained fairly lethargic, there was a blip of fresh interest from traders seeking a combination of Group I light and heavy paraffinic grades. However, new requirements for offshore deliveries were not readily filled.
Several players pointed out that it appeared to be a supply matter. It was abundantly apparent that most producers continue to run base oil facilities at reduced rates, resulting in scant availability for spot opportunities, one buyer said.
Suppliers were heard to be reluctant to discuss availability and price ideas with some potential spot buyers. However, in one case, a trader said that there was a talking price-point of around $2.13 to $2.15 per gallon FOB for light vis product. But the source added that the logistical costs of double-handling would have made the deal economically unworkable for offshore sales at this time.
Looking upstream, crude oil values have fallen from their recent highs of $73 per barrel, reached in late June, to the low $60s/bbl, levels not seen since mid-to-late May.
Analysts speculated that oil prices have recently trended lower due to the lingering uncertainty of the economic outlook, with some saying that the economy is still in a precarious state.
Only one year ago – on July 3, 2008 – crude futures settled at a record high of $145.29 per barrel, after reaching an intra-day high at over $147/bbl. Since striking that almost unbelievable number, crude dipped to the low $30s/bbl in December before rebounding this year. Presently, oil prices are more than half their value from last July.
At the close of the Tuesday, July 7, NYMEX session, light sweet crude futures ended the day at $62.93 per barrel, a significant loss of $6.96/bbl compared to the June 30 settlement at $69.89.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.