Under the terms of the agreement, HollyFrontier will continue to operate the lubricants business under the Petro-Canada trademark.

Market sources commented that the acquisition was a smart move on HollyFrontiers part. Through the purchase, the producer will not only gain access to production of Group II/III base oils, but also of white oils, waxes, specialty fluids, greases and finished lubricants, making it a very complete and integrated operation.

Last year, HollyFrontier had shelved its plans to build a new base oil plant in Woods Cross, Utah, but it appears that the project has now been cancelled altogether.

HollyFrontier currently produces Group I base oils at its Tulsa, Okla., base oils unit, which can be used for the manufacture of certain finished lubricants currently offered under the Petro-Canada brand, sources noted.

Sources also commented that HollyFrontier has better sources of sweet crude and feedstocks to make high quality base oils than Petro-Canada, as the company is mostly concentrating on processing tar sands crude at its Canadian refineries.

As far as base oil prices are concerned, there were few changes observed on the paraffinic side of the market, with no posted price revisions emerging this week and demand seeing a sudden uptick, particularly on the export front.

A few sources were of the opinion that participants were waiting for the results of the U.S. presidential elections next week before embarking on any initiatives.

Surprisingly, most of the price action was seen on the naphthenics side of the business, which has been fairly quiet since late May when the last round of increases was implemented.

This week, a domestic naphthenic base oil producer announced a 10 cent per gallon price increase on all light and heavy viscosities, effective immediately.

The price hike was said to be driven by gains in crude oil values over the last several weeks, which have resulted in base oil prices falling out of alignment with production costs.

Participants commented that naphthenic base oil demand had been steady and in line with expectations for the fourth quarter.

At the time of writing, it was unclear whether other naphthenic producers would also adjust prices.

In production news, Mexican producer Pemex was heard to be in the process of restarting its base oil plant in Salamanca, which has been off-line since early October due to feedstock supply problems. The facility has a capacity of 6,000 b/d of Group I base oils.

Upstream, West Texas Intermediate futures moved lower, erasing earlier gains amid growing uncertainty over a production freeze deal.

The price decline was brought about by news that some OPEC members may be unwilling to agree to a production cut at a meeting in Vienna later this month.

WTI futures on the CME/Nymex settled at $46.67 per barrel on Nov. 1, down $3.29 per bbl from the Oct. 25 settlement of $49.96 per bbl.

Light Louisiana Sweet wholesale spot prices closed at $48.18 per barrel on Oct. 31, down from $51.41 a week ago, according to data from the U.S. Energy Information Administration.

Brent was trading at $48.33 per bbl on the CME on Nov. 1, down $2.46 per bbl from $50.79 per bbl on Oct. 25.

Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.