U.S. Base Oil Price Report

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A number of posted price decreases were issued during the past week throughout the U.S. base oil arena. All API Group I producers announced that they already had or plan to drop postings. Following on the heels of the Group I move, Motiva, the largest Group II supplier, also cut prices.

Group I category
ExxonMobil led the pack by alerting its customers that it moved all Group I base stocks down by 21 cents per gallon this past Friday, Nov. 1, direct consumers of the company said. HollyFrontier jumped in the ring and told its customers that it, too, would lower its lineup of Group I oils by 21 cents/gal on Monday, Nov. 5. Paulsboro Refining followed suit by decreasing its base stocks by 21 cents/gal yesterday, Nov. 6. Calumet also joined in and plans to reduce its Group I grades 700 and bright stock by 20 cents/gal, on Friday, Nov. 9.

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Group II category
Motiva told its customers that it chopped its Group II products today, Wed. Nov. 7. Sources confirmed that the large provider moved down its Star 4 (110 vis) grade by 38 cents/gal, chopped 27 cents/gal from Star 6 (220 vis) and pushed down Star 12 (600 vis) by 25 cents/gal.

Although no other Group II, II+ and III producers had yet to step out with price move information by deadline, consumers highly anticipated that news of lower postings was on the horizon.

Sources suggested that this round of posting decreases is an attempt to establish a position closer to spot prices. In the Group I sector, the cuts more than reversed Septembers price hike of circa 15 cents/gal. In most cases, producers indicated that these price reductions were driven by lower operating costs, along with the slowed demand in both the domestic and offshore markets.

Prior to these price adjustments, players had indicated that spot offers had become significantly discounted to posted prices.

There is little doubt among all players that the ongoing economic woes plaguing Europe and Asia have had a big impact on the United States this year. Earlier in the year, global demand had picked up and exports from the U.S. East, Gulf and West coasts were hitting targets previously aspired to. But as the summer months passed, it became evident that the slowdown in these countries was taking a toll.

Several participants pointed out that in a strange way this has worked out for the domestic arena. They explained that by early fall, the market was dealing with several plant disruptions – both planned and unplanned, with the most serious being the problems at the Chevron Richmond, Calif., refinery. With that said, suppliers were able to cover all customer requirements with inventories that had otherwise been slated for export.

Sellers sought outlets in Mexico and a few other Latin American destinations during the past several months in efforts to place some of the length and thus helping alleviate the build-up in base stocks. Even domestic consumers had been taking spot deliveries when possible and their tanks could handle the extra quantities.

The tide has turned, however, and with customer orders now being filled without delay and the pain of not shipping as much volume offshore, suppliers are now dealing with an overhang of availability players lamented.
At the close of the Tuesday, Nov. 6, CME/Nymex session, front month light sweet crude oil futures ended the day at $88.71/barrel, jumping $3.03/bbl from last weeks settlement at $85.68.

Brent Crude was trading at $110.81/bbl at the end of the day yesterday, up $1.77/bbl from its week-ago level of $109.04. LLS (Light Louisiana Sweet) crude was trading at a premium of about $21.20/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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