To many market players surprise – but not completely out of the blue – Motiva announced a posted price increase for its API Group II and III base oils this week, the second initiative from the producer in less than a month. Just a few hours later, Chevron and Kleen Performance Products also stepped out with price markups.
Sources speculated that the second increase had been prompted by the rapid rise in crude oil and vacuum gas oil prices over the last couple of weeks.
Motiva communicated that it would be raising the price of its Group II STAR 4 (110 vis) grade by 30 cents per gallon, and its STAR 6 (220 vis) and STAR 12 (600 vis) oils by 25 cents/gal. The producers Group III STAR 4 HVI (4cSt) moved up by 30 cents/gal, and its STAR 6 HVI (6cSt) increased by 25 cents/gal. All the increases went into effect on April 9.
Motiva had recently marked up its Group II postings by 10 cents per gallon, and its Group III postings by 5 cents/gal on March 14.
A majority of paraffinic producers had lifted their posted price ranges anywhere between 5 cents to 25 cents per gallon, following Motivas mid-March increase.
Chevron announced that it was raising the price of its Group II base oils by 20 cents/gal across the board, also effective April 9, to reflect current market conditions, a company source said.
Kleen Performance Products will also be lifting the price of its Group II+ products, with the companys U.S. West Coast postings moving up to $4.26/gal for the RHT120 grade and $4.41/gal for the RHT 220/240 oil; its Midwest pricing will edge up by 20-25 cents/gal, to $4.11/gal and $4.26/gal, respectively; and its U.S. Northeast prices will move up to $4.16/gal and $4.31/gal. This pricing will be effective on shipments starting on April 15, a company source noted.
Aside from the recent jump in feedstock and transportation costs, an uptick in demand was also mentioned as one of the drivers for the increases, although a number of suppliers acknowledged that orders had not been as strong as expected for this time of the year, possibly because of the extended winter and the flooding in the Midwest.
However, a couple of sources noted that the latest increases had not really affected sales and that demand was slowly climbing. Some blenders also added that finished lube business had picked up over the last two weeks.
Buying appetite from export points such as Mexico remained steady, but was not particularly robust, and there continued to be regular shipments from the United States Gulf to Brazil. A number of shipments from Houston and refineries by the Houston Ship Channel were heard to have suffered delays because of the closure of the waterway due to the chemical spill from the Intercontinental Terminals Company (ITC), which occurred at the end of March. There were reports that vessel movements were gradually returning back to normal.
On the naphthenic front, activity proceeded at expected levels, with supply and demand deemed fairly balanced. No further price movements were reported, following the recent round of increases, which lifted prices by 10-15 cents per gallon, depending on the grade and the producer, between March 22-29.
Many sellers remained hopeful that orders of base oils and finished lubricants would pick up once participants returned from the Independent Lubricant Manufacturers Association (ILMA) meeting taking place in Coronado, California, on April 11-13.
The recent crude oil and base stock price hikes prompted several increases in the finished lubricants, greases and additives segments too, which were due to be implemented in May.
Among the latest manufacturers to communicate an increase was Omni Specialty Packaging. The company announced a price increase of 6-8 percent on both bulk and packaged lubricants and chemicals. This is due to the increases in base oils and other raw material costs, a company source said, noting that the increases would go into effect on May 1.
Upstream, crude oil futures pushed higher, with Brent trading above $71 per barrel and West Texas Intermediate hovering at five-month highs near $64/bbl. Prices received a boost from unrest in Libya, together with ongoing oil production cuts by Saudi Arabia and its allies, and U.S. sanctions on Iran and Venezuela.
U.S. shale production has decreased as well, and as a result, WTI crude prices have rallied by 30 percent in the first quarter, with the U.S. benchmark jumping from as low as $45 per barrel in early January to above $64/bbl this week, analysts observed.
On the other hand, global oil demand could weaken if the world economy slows, as some signs seem to be indicating.
On April 9, West Texas Intermediate April futures settled at $63.98 per barrel on the CME/Nymex, up $1.40/bbl from $62.58/bbl on April 2.
Brent futures for June delivery closed at $70.61/bbl on the CME on April 9, and had settled at $69.37/bbl on April 2.
Light Louisiana Sweet crude wholesale spot prices settled at $68.98/bbl on April 5, compared to $67.84/bbl on April 1, according to the Energy Information Administration.
Low sulfur vacuum gas oil was at May WTI plus $14.50/bbl ($78.90/bbl) and high sulfur VGO was at crude plus $14.75/bbl ($79.15/bbl) on April 8. By comparison, low sulfur VGO was hovering at $76.34/bbl and high sulfur VGO at $75.59/bbl on April 1, according to data published by PetroChemWire.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase inExcel format.