News of posted price reductions began to filter through the U.S. base oil arena this week. ExxonMobil pulled away from the pack, announcing decreases ranging from 10 cents to 20 cents per gallon. Sources said it was no wonder this action was emerging, given that buyers have been pressuring suppliers to lower postings since early-to-mid August.
Direct customers of ExxonMobil said the producer plans to lower its API Group I postings on Friday, Sept. 16. Solvent neutral 100 will be dropped by 13 cents/gal; 150, 330 and 600 neutrals will go down 10 cents; and bright stock will shed 20 cents/gal.
ExxonMobil customers speculated the company lowered U.S. prices following a similar move it made in Asia during the past week. Also, customers expected that adjusted postings were emerging because feedstock costs have abated and stock positions improved on the production side.
No other producers had followed suit as of Tuesday, but a number of keen buyers appeared confident that other Group I producers would jump on the bandwagon and lower posted prices within the next week or so. It seemed less likely, they conceded, that Group II and III prices would be adjusted downward.
Participants from both the buy and sell sides still agree that the overall supply/demand picture remains generally balanced-to-tight, depending on the grade. Certain cuts still remain difficult to source, while others are much easier to attain.
In most cases, producers say they have successfully caught up with any backlog in orders that may have evolved during the second quarter, when overall supply was extremely tight.
A number of sales controls had been issued this year, but many of those plans have since been removed. It was understood that Group II supplier Motiva has modified its long-standing sales allocation, removing restrictions on Star 6 (220 vis) only; two other grades, Star 4 (110 vis) and Star 5+ (130 vis), remain under volume controls. Sources also said that Chevron will likely remain on its sales allocation scheme through October.
As a reminder to the base oils industry and as reported in Lube Report last year, Motiva will cease production of its Star 3 (Group II 70 vis) and its Star 5+ (Group II+ 130 vis) grades effective Jan. 1, 2012. Motiva provided customers with 15 months of advance notice, saying it planned to focus on areas that complement our processing capabilities and operating efficiencies as well as the needs of the marketplace.
Meanwhile, and despite this weeks posted price decreases, base oil producers are keeping a close eye on upstream developments. Crude prices began to creep up into the high $80s per barrel range last week and topped the $90/bbl mark on Tuesday, a level not seen for about six weeks.
At the close of the Tuesday, Sept. 13, CME/NYMEX session, front month light sweet crude oil futures ended the day at $90.21 per barrel, a gain of $4.19 from the week earlier settlement at $86.02/bbl. Brent crude ended the day at $111.51/bbl.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.