U.S. Base Oil Price Report


Flint Hills Resources stepped out this week with news that it too would up its posted paraffinic prices. Motiva remains the only producer not joining the latest round.

On Monday, June 6, Flint Hills Resources raised posted prices by 30 cents per gallon on its lineup of API Group II grades including 70HC, 75HC, 100HC, 230HC and 600HC.

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Market supply/demand fundamentals have not changed, sources say. Consumers reiterated with certitude that theyve seen no improvement in availability. Some shipments are delayed from a number of suppliers. Buyers said there are no extra volumes of many grades, particularly Group II and III, to be had, and the situation could remain difficult throughout the summer. A few sources emphasized that most Group I grades are also very tight.

All players stress how dreadful the U.S. supply picture has become. They say money alone cannot assure additional quantities. Sellers point out that no matter how much a buyer may offer to pay, there simply isnt spare material available. Suppliers did mention, however, that in most cases, contract volumes are being satisfied.

Due to the extreme shortage of supply, pure spot transactions have practically ground to a halt in recent months. It is rare when a spot truck, railcar or barge can be secured. Traders lament that cargo-sized parcels are virtually impossible to find, adding that surplus product is thin in all key global regions. It is said that the Brazilian producer Petrobras could have spot material to offer in the coming months, but details are vague.

Demand has been healthy, and despite the dire supply situation, base oil consumers are eager to keep their own inventories at sufficient levels. However, this has been challenging, and for the most part stock positions are well below comfortable levels.

The supply/demand situation on the naphthenic side of the market largely mirrors that of the paraffinic scene. Although most grades remain exceptionally tight, sources said, there has been some relief this week. At least one producer reports that it has caught up with back orders, after dealing with delayed shipments in recent months.

Looking upstream, there continues to be a strain on feedstock costs as vacuum gas oil remains at a steep premium of circa $23 to $25 per barrel to benchmark WTI crude. Domestic crude types like Light Louisiana and even some imported crudes are also running at stiff premiums of $17 to $20 per barrel to WTI.

At the close of the Tuesday, June 7, NYMEX session, front month light sweet crude oil futures ended the day at $99.09 per barrel, shedding $3.61 from the week-earlier settlement at $102.70/bbl.

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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