U.S. Base Oil Price Report


U.S. base oil market participants were somewhat surprised to learn that Motiva had revised posted prices down, effective Jan. 10. Shortly thereafter, Phillips 66 stepped out with decreases of its own, setting an effective date of Jan. 15.

Motiva lowered prices of its API Group II Star 4 (105N) and Star 6 (220N) by 25 cents per gallon, and its Star 12 (600N) grade by 30 cents/gal.

Phillips 66 decreased posted prices for its Group II Pure Performance 70N, 80N, 110N and 225N by 25 cents/gal, while its 600N cut was reduced by 30 cents/gal. Its Group III Ultra S2, S3, S4 and S8 prices underwent a 25 cents/gal reduction.

Interestingly, it was also heard that Petro-Canada had moved Group III postings up to bring its prices more in line with market values, but the increase was communicated a couple of days before the Motiva move, and further details were unavailable.

So far, no other producers have expressed their intentions of adjusting prices. One supplier pointed out that several large-volume buyers have contracts under which pricing does not change until the start of the new month, which means that even if a price revision were to be announced now, these customers would not see a decrease until Feb. 1.

A few market players expressed puzzlement about the decision to decrease prices, given that margins have been thin and production costs remained high.

Demand was fairly sluggish, particularly during the previous week as severe winter weather prevented many participants from reaching their workplaces, or from traveling to visit customers. Requirements also slowed down after Motivas decrease announcement, as buyers were waiting to see if other suppliers would follow.

At the same time, most participants recalled that a similar pricing situation had arisen a year ago, when a majority of producers adjusted prices down in early January.

On that occasion, when demand had started to improve on heightened seasonal activity in late February, the market reversed direction, with suppliers implementing price increases, sources explained.

One big difference this year will be that by the time demand is in full swing towards the end of the first quarter, additional product from the new Chevron Group II plant in Pascagoula, Miss., will enter the domestic supply scene, and likely exert downward pressure on pricing.

The prospect of the extra capacity might partly explain the current decreases, sources added, as suppliers are trying to either protect or gain market share.

Chevron confirmed that construction of its new Pascagoula Base Oil Plant is complete and the start-up process has begun. All of the major equipment for the Pascagoula Base Oil Plant is in place and we are readying the plant for start-up. We are currently conducting normal equipment testing and start-up procedures, while applying our strict operational excellence standards. We fully expect to meet all customer commitments, a company spokesperson said in a statement last Wednesday.

Upstream, WTI crude futures increased and then slipped again amid speculation that U.S. fuel stockpiles were mounting, reflecting a slowdown in domestic crude demand.

WTI settled on the CME/Nymex at $92.59 per barrel on Tuesday, Jan. 14, down $1.08 from a settlement at $93.67/bbl on Jan. 7.

Brent crude was trading around $106.39 per barrel on the CME, down 96 cents from $107.35/bbl a week ago.

LLS (Light Louisiana Sweet) was trading at a premium to WTI of around $8.10/bbl on Jan. 14, compared with $6/bbl on Jan. 4.

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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