U.S. Base Oil Price Report


A general market slowdown and retreating crude oil numbers may have prompted ExxonMobil to rescind a price increase that the company had announced just days earlier.

According to sources, ExxonMobil had communicated to customers that the company would be raising the price of its API Group I and II/II+ base oils by 12 cents per gallon across the board as of Sept. 30. But just a few days before the increase went into effect, on Sept. 27, customers received a letter that announced that the company had withdrawn the increase.

A number of participants had expressed surprise at the initial increase notification, and were skeptical that it would be implemented in its totality, mainly because the last quarter of the year is typically a difficult time to achieve price hikes.

Traditionally, base oil demand starts to wane in September, and declines even more blatantly during the last few weeks of the year as buyers utilize existing stocks in an effort to reduce inventories and tax liabilities before Dec. 31. Many producers resort to offering attractive discounts to move out product and lower inventories as well.

Additionally, while West Texas Intermediate crude oil prices were hovering at lofty levels in the high $50s per barrel when the increase was first announced, numbers have since retreated to the mid $50s/bbl.

On Monday, oil futures fell about three percent as crude production in Saudi Arabia has been restored to the levels registered before the attacks on its oil facilities, and there were renewed concerns about global economic growth.

However, futures inched up on Tuesday on reports that OPECs output in September had dropped to its lowest in eight years, and U.S. production had fallen for the third month in July.

On Tuesday, Oct. 1, West Texas Intermediate futures settled at $53.62 per barrel on the CME/Nymex, and had closed at $57.29/bbl on Sep. 24. Futures were significantly down from $59.34/bbl on Sep. 17.

Brent futures for December delivery were reported at $58.89/bbl on the CME on Oct. 1. November futures had closed at $63.10/bbl on Sep. 24.

Light Louisiana Sweet crude wholesale spot prices settled at $57.99/bbl on Sep. 30, had closed at $62.72 on Sep. 23, and were down from $67.40 on Sep. 16, according to the Energy Information Administration.

Low sulfur vacuum gas oil was at Nov. WTI plus $14.10/bbl ($68.17/bbl) and high sulfur VGO was at crude plus $13.85/bbl ($67.92/bbl) on Sep. 30. By comparison, low sulfur VGO and high sulfur VGO were both hovering at $70.84/bbl) on Sep. 23, according to data published by OPIS PetroChemWire.

In automotive-related news, the United Auto Workers strike at General Motors Co. entered its third week, with workers on the picket lines dealing with fatigue and missing paychecks, and the company experiencing the financial strains of lost factory production, The Wall Street Journal reported.

Aside from the organizations directly involved in the strike, many GM suppliers, including lubricant manufacturers, were expected to feel an impact as they have not been able to deliver parts and products to the auto maker, sources said. The nationwide strike, which analysts expect to dent GMs third-quarter earnings, is extending into the fourth quarter, threatening the companys forecast for a strong second half of the year.

Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase inExcel format.

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