The steady decline in crude oil and feedstock costs are keeping participants in the U.S. base oil market on their toes. Several producers, including Motiva, Chevron, Phillips 66, HollyFrontier, and Calumet responded to the sharp drops by decreasing postings again this week, following several previous adjustments.
A typical seasonal slowdown in demand and a need to reduce inventories at the end of the year were also behind the price reductions, sources explained.
In the API Group I segment, HollyFrontier indicated that it would be reducing its solvent neutral 70 through SN525 postings by 45 cents per gallon, and would lop 35 cents/gal from its price for bright stock, effective Dec. 17.
Calumet notified customers that it would reduce its 600-vis cut and bright stock by 45 and 35 cents/gal, respectively, on Dec. 22.
The price decrease puts HollyFrontiers revised SN100 cut at $2.59/gal as reflected in the price table below – and at similar levels to those registered in January 2010, when the producers price was at $2.56/gal, according to Lube Reports database. HollyFrontiers postings were first recorded on June 24, 2009.
Within the Group II category, Motiva spearheaded the latest round of decreases by lowering its Star 4 (110-vis) cut by 50 cents/gal, and its Star 6 and Star 12 cuts (220 and 600-vis) by 55 cents/gal on Dec. 16.
In a similar pattern, Chevron will be marking down the price of its 100R grade by 50 cents/gal, and its 220R and 600R oils by 55 cents/gal as of Dec. 17. The company is adjusting prices to reflect current supply/demand balance and market conditions, a company source explained.
Calumet has decided to adjust its Group II prices as well, and will be reducing the price of its 80, 100 and 150 vis cuts by 50 cents/gal, and its 325 vis cut by 55 cents/gal. The changes will take effect on Dec. 22.
Phillips 66 also lowered the price of its base oils on Dec. 16, but the drops were slightly larger than Motivas and Chevrons, which likely was because Phillip 66s postings were higher before the cuts, and it is now aligned with the other two suppliers. Phillips 66 reduced the price of its PP 70N, 80N and 110N by 60 cents/gal, and its PP 225N and 600N by 65 cents/gal.
Additionally, Phillips 66 decreased the price of its Group II+ and Group III Ultra-S cuts by 40 cents/gal across the board on Dec. 16.
The price revisions place the 600-vis grade of Motiva, Chevron, and Phillips 66 at $2.80/gal, as portrayed in the price table below. These levels had not been seen since Oct. 2005, when Motivas 600 cut was priced at $2.84/gal, and June 2009, when prices were around $2.81/gal.
On the naphthenic front, the dust appears to have settled – at least momentarily – following 20-cent cuts by Ergon, Cross Oil and Calumet in response to plummeting crude oil values.
Calumets decrease became effective earlier this week, on Dec. 16, while Cross will lower values on Dec. 19. Ergon had introduced price decreases for its naphthenic base oils on Dec. 8.
San Joaquin Refining was heard to be evaluating the market situation to decide whether to adjust prices as well.
Upstream, WTI crude futures regained lost ground after slipping below $55 per barrel for the first time in more than five years.
Crude oil futures have dropped sharply after the Organization of Petroleum Exporting Countries (OPEC) refused to adjust production quotas despite a global slowdown in demand and increased production in the United States. OPEC is not expected to reduce output even if oil prices fall as low as $40/bbl, and expressed its intention of waiting at least three months before calling an emergency meeting.
WTI settled on the CME/Nymex at $55.93/bbl on Dec. 16, down $7.89/bbl from a settlement at $63.82/bbl on Dec. 9.
Brent crude was trading around $61.06 per barrel on the CME on Dec. 15, down $5.13/bbl from $66.19/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.