U.S. Base Oil Price Report


A number of U.S. base oil producers spiced up an otherwise insipid price scenario when they stepped out with increase announcements two weeks ago, but the market has gone quiet and no further initiatives have surfaced.

ExxonMobil was the first supplier to come out with an increase for its API Group I posted prices, which went up by 10, 12 and 15 cents per gallon, depending on the grade, on May 23, sources said. All of the producers Group II+ postings were also lifted by 8 cents per gallon.

Shortly after, Chevron announced an across-the-board 10 cent-per-gallon hike for its Group II West Coast base oil postings, effective May 27.

One of the main reasons for the price hike was an increasingly tight supply and demand balance, which seemed to be particularly snug within the Group I segment, and was likely behind ExxonMobils overture.

The other Group I producers quickly reacted as well, with HollyFrontier, Paulsboro Refining and Calumet lifting prices by 10 to 15 cents per gallon, depending on the supplier, following ExxonMobils move.

Calumet also increased its Group II postings by 10 cents per gallon on June 1, and was striving to catch up with customer orders as it recently restarted its Group I and II plant in Shreveport, La., after completing a routine turnaround.

Market players said that it was surprising that ExxonMobil had initiated an increase, but what was even more baffling was that Chevron would also be seeking an increase when the producer is about to introduce a significant amount of Group II oils from its new plant in Pascagoula, Miss.

If anything, participants would have expected some competitive price action before the plant achieves full operation in late July or early August. Some sources thought that it did not make sense to increase prices now, only to decrease them six weeks later.

However, others said that producers had increased prices in hopes of protecting margins if prices indeed were to move down in coming weeks.

Interestingly enough, neither Flint Hills Resources nor Phillips 66 were seeking any price revisions for their Group II oils. Motiva also played it cool and abstained from moving its postings.

Base oil demand continues to be described as steady, and most producers report snug supply conditions, which are expected to become more pronounced within the Group II segment once the Excel Paralubes plant is taken off-line for an extended turnaround. Flint Hills Resources and Phillips 66 share the facilitys base oil output of 22,200 b/d of Group II base oils.

The start of the turnaround has been slightly delayed from early June because the plant operators were waiting for the delivery of a piece of equipment, sources said. The plant is now expected to be taken off-line on June 12.

Upstream, West Texas Intermediate crude futures strengthened on expectations that crude stockpiles would be drawn down this week.

WTI settled on the CME/Nymex at $104.35 per barrel on June 10, up $1.69 from a settlement at $102.66/bbl on June 3.

Brent crude was trading around $109.52 per barrel on the CME, up 70 cents from $108.82/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.

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