In the wake of the posted price move initiated by Flint Hills Resources a week ago, ConocoPhillips stepped out this week and lowered postings between 4 cents and 22 cents per gallon.
So far, no other major producers have jumped into the fray, but sources expect it is just a matter of time. These posted price moves mark the first API Group II reductions of 2011. In fact, the last fully completed round of decreases issued by all Group II producers occurred in March and April 2009.
ConocoPhillips said that it dropped postings for its lineup of API Group II and its Ultra-S Group II+ and III base stocks effective today, Dec. 7. Posted prices for neutrals 70 and 80 were lowered by 22 cents/gal, 110 vis went down by 20 cents/gal, 225 vis lost 21 cents/gal, and 600 shed only 4 cents/gal. The company also confirmed that its Ultra-S Group II+ 2 cSt and 3 cSt posted prices both moved down by 20 cents/gal. Group III 4 cSt also dropped by 20 cents/gal while 8 cSt was unchanged. ConocoPhillips markets S-Oils Ultra-S base stocks in North America.
Sources suggested that a drop off in domestic demand along with a recent stream of competitively-priced European and Asian imported material prompted U.S. producers, at least FHR and CP, to adjust postings downward.
Several large consumers anticipate that other major refiners will eventually jump on board and lower postings, even though some producers have indicated to direct customers that there are no immediate plans to follow.
Difficult feedstock costs continue to hold back some producers from moving base oil postings down, said some observers. Crude oil futures have now moved above the $100 per barrel mark and refining margins are said to be squeezed.
Nevertheless, in many cases, key feedstock costs have weakened from the very high levels seen for much of this year. Vacuum gas oil differentials have eased to around $10 to $16 per barrel above WTI, a drop of about $10 from October levels. The same holds true for LLS (Light Louisiana Sweet) now pulling in a premium of about $10.50/bbl to WTI.
At the close of the Tuesday, Dec. 6, CME/Nymex session, front month light sweet crude oil futures ended the day at $101.28 per barrel, a gain of $1.49 from last weeks settlement at $99.79.
Brent crude was trading at $110.73/bbl at the end of the day yesterday, hardly changed from its week-ago level at $110.95. LLS crude was trading at a premium of about $10.65/bbl to WTI on Tuesday.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.