Majors Bump Up Finished Lube Prices


Majors Bump Up Finished Lube Prices

Several major oil companies recently informed U.S. customers of price increases on finished lubricants, with most going into effect around mid-July and most in the range of 4 percent to 6 percent.

Suppliers cited various factors including increased costs for raw materials used in manufacturing – such as base oil – and expenses for delivery and packaging material.

  • ExxonMobil informed customers it would increase prices on its branded and unbranded lubricants and greases by up to 4 percent effective July 15.
  • Shell notified customers it would raise prices by up to 6 percent effective July 18, citing increasing costs of raw materials and delivery of its products.
  • Chevron announced to its customers a general price increase on all lubricating oils and greases up to 6 percent effective July 18.
  • Citgo told customers it would increase prices 4 percent to 6 percent on branded and private label products effective July 18.

Earlier, Cam2 informed customers it would raise prices on bulk and packaged products 6 percent to 10 percent effective July 8, citing increases in base oil prices. That was on top of an earlier increase of 6 to 10 percent that went into effect June 1. Meanwhile, Calumet had informed customers of price increases of 20 cents per gallon on bulk and 25 cents/gal on packaged product, effective June 20.

Photo: Nneirda / Fotolia

The markups in finished lubes come after base oil prices began to rebound, following a protracted slide in caused by the steep decline in crude oil costs. Finished lube prices also dropped when base oils were falling, though the amounts differed significantly between suppliers.

Blender members of the Independent Lubricant Manufacturers Association reduced their prices by an average of more than $1.50 per gallon from 2012 through the end of 2015, an industry source told Lube Report. During that same period, the source noted, major oil companies lowered their posted prices an average of 17 cents per gallon, although they were doing plenty of one-off deals under the radar.

As soon as the base oil market turned the corner, majors jumped at the opportunity to increase pricing across the board, said the source, who spoke on condition of anonymity. He suggested oil majors risk losing market share to smaller suppliers. The big players need to be careful not to overstate the value of branded product as their targeted consumers become more comfortable with and aware of the value of ILMA spec products.

A long interrupted slide in posted base oil prices concluded during March. For example, from August 2014 to March 2016, ExxonMobils Gulf posted price for Group I 150 fell from $3.81/gal to $1.90/gal. As of last week, it had risen back to $2.45/gal. Meanwhile, Motivas Group II 220 cut went from $3.85/gal to $1.80/gal during the August 2014-to-March 2016 timeframe, and then rebounded to $2.27/gal as of last week.

Ned Zimmerman, chemicals group leader for Cleveland-based industry market research firm Freedonia Group, said that while there are always a number of variables that go into pricing decisions, this increase in finished lube prices likely reflects the rise in raw material prices from the beginning of the year.

Group I and II base oil prices fell over the past couple of years, following the drop in crude oil prices, Zimmerman told Lube Report. This allowed finished lubricant producers to lower their prices back in 2015, though it doesnt appear as though the finished lubricant price cuts fully reflected the fall in underlying base oil costs. The lubricant producers operating margins benefited from the lower raw material costs.

However, he pointed out, the rise in crude oil prices over the past couple of months has reduced this advantage as base oil prices have followed crude prices higher. There has been some uncertainty in the market over whether or not the rally in crude oil prices would be sustainable going forward, but the willingness of the finished lubricant producers to raise their prices at this point seems to signal their belief that a new floor in crude and base oil prices has been reached, Zimmerman said.

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Finished Lubricants    North America    Region    U.S.A.