Producers confirmed that they had received many calls in the past two weeks–some from buyers who are not regular customers–but the suppliers have been unable to sell extra product because they are operating with low inventories.

Calumet, for instance, is a few weeks away from catching up on back orders, and hopes to achieve this goal immediately after the 4th of July holiday, a company source said. The suppliers Group I and II plant in Shreveport, La., completed a routine turnaround in May, which is why the suppliers inventories have been strained in recent weeks, despite the fact that the refinery is running well.

Aside from robust demand and recent turnarounds, supply of Group I cuts is also snug because refiners had favored fuel products in detriment of base oil output, given high feedstock costs and weak base stock margins earlier in the year.

All U.S. Group I producers moved prices up by 10 to 15 cents per gallon, depending on the supplier and the particular grade, between late May and early June.

Another event that is looming large on buyers mind is the imminent start of a 58-day turnaround at the Excel Paralubes base oil plant in Westlake, La. The 22,200 barrels-per-day Group II unit was expected to be taken off-line in early June, but the turnaround has been postponed until June 25 because the plant operators are waiting for the arrival of several parts, according to sources. Output from this unit is shared by Flint Hills Resources and Phillips 66.

Suppliers have been building inventories to meet contract commitments during the outage, but buyers are still worried that there might not be enough storage capacity to keep product for all of their requirements during the next couple of months.

Surprisingly, neither Flint Hills Resources nor Phillips 66 adjusted Group II prices when two other suppliers, Chevron and Calumet, increased postings across the board by 10 cents/gal on May 27 and June 1 respectively. Motiva was also absent from the latest round of increases.

ExxonMobil was the only producer to lift Group II+ prices, by 8 cents/gal. SK and Phillips 66 refrained from revising their Group II+ and Group III pricing.

Phillips 66 announced yesterday that it has opened a new supply point in Houston for Ultra-S Group III base oil from S-Oil in South Korea. Phillip 66 is the exclusive North American marketer of Ultra-S branded base stocks. The Houston location joins Phillips 66s other Group III supply points in Los Angeles, New Orleans, Savannah, Ga., and McKees Rocks, Pa.

On the naphthenic base oil front, suppliers report a steady stream of orders and stable pricing, although sources did acknowledge that activity in the export market has slowed down. There have not been any price initiatives heard since the last domestic price increase, which was implemented in mid-March, sources added.

Upstream, West Texas Intermediate crude futures weakened compared to earlier in the week on expectations that fighting in Iraq would not affect the nations oil supply.

WTI settled on the CME/Nymex at $106.36 per barrel on June 17, up $2.01 from a settlement at $104.35/bbl on June 10.

Brent crude was trading around $113.45 per barrel on the CME, up $3.93 from $109.52/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.