U.S. Base Oil Price Report

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The frenzied U.S. base oil arena was again riddled with price hikes this week, but this time the increases were substantially higher than seen in the past, up to 60 cents per gallon.

In the paraffinic sector, Flint Hills Resources, ExxonMobil, Motiva, Citgo, Sunoco, Calumet, Valero and Chevron issued price notices during this past week, shocking most recipients with the amounts posted prices are heading up.

FHR confirmed that it pushed up all its API Group II neutrals by 30 cents per gallon on Monday, June 30.

On Tuesday, July 1, ExxonMobil stunned its customers with increases of 35 to 50 cents/gal, according to sources. They reported that the major raised its SN 100 through and including SN 330 by 50 cents/gal, while the SN 600 moved up by 35 cents/gal. The company also added 45 cents/gal to bright stock and to all its Group II+ grades. (Note that ExxonMobils East Coast postings have been removed from the chart below. This follows the closure of the ExxonMobil facility in Bayonne, N. J., in June.)

Also on July 1, Motiva astounded its direct buyers with 50 to 55 cents/gal hikes. Star 3, 6 and 12 climbed 50 cents/gal, while Star 4 and Star 5+ rose by 55 cents/gal.

Citgo pushed up its Group I 325 and 650 neutrals by 35 cents/gal and bright stock by 45 cents/gal, effective July 1. Also, in the second half of June, the company eliminated posted prices for 85, 100 and 150 vis grades.

Today, July 2, Sunoco implemented a 50 cents/gal increase for all Group I base stock postings.

Also today, Calumet initiated hikes for its Group I and II base oil posted prices. The company raised its 100 to 325 vis grades by 50 cents/gal, pushed up 700 vis by 35 cents/gal and brought up bright stock by 45 cents/gal.

Valero said it would push through 45 to 50 cents/gal increases on its Group I and II base stocks on July 4. Neutral grades 100 through 350 will climb 50 cents/gal, while 500 vis, 700 vis and bright stock will rise by 45 cents/gal.

Chevron plans to adjust its base oil postings on July 7 by 35 to 60 cents/gal. The 100 R will increase 60 cents/gal, 220 R will rise by 55 cents/gal, while 600 R will climb 35 cents/gal.

Meanwhile, naphthenic producers, including Ergon, Calumet, Cross Oil and Nynas stepped out with 30 cents/gal across-the-board upward price amendments this week. Ergon will adjust prices on July 3, Calumet moves on July 4, while Cross has set July 7 as the effect date. Nynas plans its price move for July 8. San Joaquin is expected to announce its intentions regarding prices later this week.

Skyrocketing crude oil prices are largely to blame for this spate of price hikes, sources lamented. Base oil producers said they are simply trying to keep up with the ever-rising costs of operating while margins were being squeezed.

However, there are a number of outspoken players that suggested that hikes totaling 50 cents or higher were beyond fair to the downstream sector. They added that these steep increases were outside the boundary of margin recovery and were overly aggressive.

There was no denying that the overall tight supply situation was also a factor driving base oil prices higher, many suppliers reiterated.

Demand is deemed voracious and producers are having a very difficult time keeping up with filling all customer orders in a timely manner. In many cases, shipments are delayed up to an average of two weeks, sometimes longer. In other instances, customers are not receiving their full requirements, but rather reduced volumes.

Either way you look at it, the base oil refining side as well as the finished lubricant segment are in a frenzied state, onlookers observed. These are unprecedented times, most say. Those that have been in the base oil industry for as long as 30 years have never seen market conditions so difficult.

Fueling concerns, the Paris, France-based International Energy Agency said in a report that spare OPEC capacity will shrink by 2013, keeping the market tight. Adding more tinder to the fire, ABC, citing an unidentified Pentagon official, is reporting that Israel may bomb Iran if OPECs second-largest producer acquires enough uranium to build a weapon, further threatening Mideast supplies.

On Monday, oil touched a record $143.67 in inter-day trading, more than double the price a year ago. The price has climbed 38 percent between April and June, the biggest quarterly increase in nine years.

At the close of the Tuesday, July 1, NYMEX session, light sweet crude settled at $140.97 per barrel, up $3.97 from the week earlier close at $137.

Carolyn L. Green, based in Houston, can be reached directly at carolyn.l.green@gmail.com.

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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