U.S. Base Oil Price Report


Although the U.S. base oil market was generally quiet this week, a few naphthenic producers announced fresh price hikes. Sources speculated that other pale oil providers would likely jump on board and push up prices in the coming weeks.

Ergon, the largest U.S. naphthenic producer, stepped out early this week to notify its customers that it planned to raise its lineup of naphthenics by 16 cents per gallon on Friday. Oct. 5.

Calumet will up its pale oils by 15 cents/gal, effective Oct 11, and Cross Oil said it would follow, although it did not announce an effective date.

Base oil business in the United States was viewed as moderately improved by many participants this week, but still off from scheduled forecasts for the 2012 fall buying season. Many players attribute the slowdown here on the economic downturn in Europe and troubles in Spain.

Depending on which segment, overall consumption was down by an estimated 10 to 15 percent, up from earlier estimates for some end-uses, but down for others, several consumers speculated.

Suppliers were encouraged with the improved buying trend and were seen as positive that customer volumes would build over the next month or so.

For the most part, base oil spot prices have finally steadied alongside the slight uptick in demand, players commented. Suppliers have backed away from offering steep discounts, consumers indicated. In some cases, in efforts to move additional volumes, a seller may offer an extra several cents per gallon below the already established sell price for a tank truck or barge load. (In June-August, some sellers were heard to be discounting upward of 50 cents per gallon for spot transactions.)

Looking upstream, futures prices held in a rather tight range of about $1 per barrel in up and down movement the past week. Support for the low $90s/bbl prices spectrum was linked to a jump in U.S. home prices which increased 4.6 percent in August compared to one year ago. Analysts say that is the largest year-over-year increase in more than six years. The new data provides more evidence that the housing market continues to improve. Automobile sales were also showing a substantial rise in a one-year period with September 2012 sales up 11 percent over the same time in 2011, according to new data.

Still, analysts’ observations reveal that investors remain concerned about Europe’s ongoing financial crisis. They also suspected that keeping a lid on oil prices is the slowdown in growth in China – which is otherwise a large importer of crude.

At the close of the Tuesday, Oct. 2, CME/Nymex session, front month light sweet crude oil futures ended the day at $91.89/barrel, a modest increase of 52 cents/bbl from last weeks settlement at $91.37.

Brent Crude was trading at $111.55/bbl at the end of the day yesterday, rising $1.15/bbl from its week-ago level of $110.40. LLS (Light Louisiana Sweet) crude was trading at a premium of about $19.25/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.

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