U.S. Base Oil Price Report

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While largely stable conditions generated little excitement in the U.S. market, some discussions centered on changes in ExxonMobil’s base oil slate, following its Baytown, Texas, plant expansion completed earlier this year.

According to sources, production of ExxonMobil’s EHC 60 cut, which had been marketed as an API Group II+ product, has been discontinued at Baytown. As a result, the EHC 60, which appeared under the 190 viscosity designation in Lube Report‘s Posted Price table below, will be withdrawn from the chart.

The company is now producing an EHC 65 cut instead, classified as a regular Group II grade of around 200 vis in the standard base oil nomenclature.

ExxonMobil will continue to manufacture its EHC 45, which belongs to the Group II+ category and has a 110-130 vis specification as shown in the Posted Price table. It was heard that the producer will be increasing output of this cut and enhancing some of its properties by utilizing a catalytic dewaxing process.

While there was talk that ExxonMobil had started to offer the new EHC 65 cut to potential buyers, it may take some time for the product to be widely used in the market, as it requires the completion of additive approvals, among other procedures. Some sources hinted at the possibility that the cut would not find traction in the market until September or October.

The question of whether most of the additional production will be for ExxonMobil’s downstream applications, or whether it will find its way into the wider domestic market is still unanswered. Some sources said that large quantities of ExxonMobil’s products would likely continue to move to Mexico, while others expected most of the output to be directed towards ExxonMobil’s own operations.

There has also been some discussion regarding the potential pricing of the new grade.

A couple of sources mentioned having received a “list price” of the EHC 65 at $2.50 per gallon FOB, while a few others alluded to having discussed spot levels between $2.00-$2.10/gal. There was no confirmation forthcoming from this producer.

Meanwhile, prices for other paraffinic base oils were described as largely stable, supported by healthy demand of the heavy-vis cuts and steady requirements for the lighter grades.

The heavy-vis cuts are still considered to be tight, including the Group II 600N cut, despite last year’s introduction of additional barrels from Chevron’s new plant in Pascagoula, Miss.

Some sources attributed this tightening to a scaling back in production rates at a number of plants earlier in the year, while others said demand had flourished in the second quarter and large quantities of heavy grades had been exported as well.

Similarly steady conditions were reported on the naphthenic side of the business, with producers feeling jittery about crude oil values as numbers have moved up this week and margins have come under pressure.

West Texas Intermediate (WTI) futures closed at their highest level since December on June 2, pushed by a weak dollar, together with expectations that U.S. crude supplies may have dropped for a fifth straight week.

WTI settled on the CME/Nymex at $61.26 per barrel on June 2, up $3.23 from its May 26 settlement at $58.03 per barrel.

Brent crude was trading around $65.49 per barrel on the CME on June 2, up $1.77 per barrel from $63.72 per barrel 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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