Calumet joined the ranks of producers who have implemented base oil price increases in the U.S. this week, by lifting all of its paraffinic oil postings on June 1.
Calumets API Group I and II base oils were increased by 10 cents per gallon, with the exception of bright stock, which moved up 15 cents/gal.
Tight market conditions were mentioned as one of the drivers for the increases, together with buoyant demand, high production costs and lean margins.
Calumets inventories are particularly low because the producers Group I and II plant in Shreveport, La., has just been brought back on stream, following a routine turnaround conducted from mid-April to mid-May. Calumets unit can produce 4,800 barrels per day of Group I base oil and 7,000 b/d of Group II grades.
Buyers are also bracing for continued tightness in the Group II segment, as the Excel Paralubes refinery in Westlake, La., which is shared by Phillips 66 and Flint Hills Resources, was expected to be taken off-line for an extended turnaround, starting in early June and lasting through the beginning of August, according to sources.
The suppliers will be doing their utmost to meet customers product needs during the outage and have been preparing inventories for the turnaround. The Excel Paralubes plant has a production capacity of 22,200 b/d of Group II base oils and is currently still running at full rates, sources added.
A few market players still wondered whether the suppliers would have enough base oils to cover requirements during such an extended turnaround.
ExxonMobil was the first out the gate during the latest round of price increases, with Chevron, HollyFrontier and Paulsboro Refining following close behind.
According to sources, ExxonMobil lifted its Group I posted prices by 10 cents/gal, 12 cents/gal and 15 cents/gal, depending on the grade, while its Group II+ values were raised by 8 cents/gal, with all the hikes becoming effective on May 23.
Chevrons West Coast Group II postings were hiked by 10 cents/gal across the board on May 27.
HollyFrontier lifted its Group I postings by 10 cents/gal and 12 cents/gal on May 28.
Also within the Group I segment, Paulsboro Refining raised its prices by 10 cents/gal, 12 cents/gal and 15 cents/gal, varying according to the grade, with an effective date of May 29.
Bright stock seems to have generally undergone the highest adjustment because its availability is very limited, demand remains strong and it is difficult to find a replacement for this product, suppliers explained.
While the price hikes came as a surprise to some players, others conjectured that they were a strategic move to preserve margins if prices start to weaken in the fall, particularly in the face of additional capacity coming on stream. Chevron is preparing to introduce commercial product from its new 25,000 b/d base oil plant in Pascagoula, Miss., in late July.
Upstream, West Texas Intermediate crude futures were steady, after a two-day decline, on speculation that crude stockpiles in the U.S. had shrunk.
WTI settled on the CME/Nymex at $102.66 per barrel on June 3, down $1.45 from a settlement at $104.11/bbl on May 27.
Brent crude was trading around $108.82 per barrel on the CME, down $1.20 cents from $110.02/bbl a week ago.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.