ChevronTexaco announced yesterday that it will raise U.S. posted prices for its Group II base oils by 7 cents per gallon effective Friday. Industry sources expressed varying opinions about whether other Group II suppliers will do likewise.
No changes were announced for Group I postings, and consensus seemed to say that that end of the market may reluctantly sit tight after limited price hikes by ExxonMobil last week.
Base oil gross refining margins have decreased sharply from January to early April, as crude oil prices rose from less than $20 per barrel to the mid-$20s. Base oil postings changed just once during that period, and that was a cut in February. Base oil suppliers and even some purchasers have said for several weeks that mark-ups were in order but that they were awaiting movement by market leader ExxonMobil.
ExxonMobil raised postings for Group II-plus stocks April 9 but held steady on its Group I prices. ChevronTexacos increase, reported by sources, was the first since ExxonMobils announcement. Several sources predicted that other Group II suppliers will follow suit.
Im sure the others will move now, Id bet my paycheck on it, one large purchaser said. Its something theyve been anxious for with margins having shrunk so much.
Others suggested that demand and crude costs may be too uncertain to support price hikes.
Demand has picked up, but the economy is still not looking great, one source said. He added that political turmoil in Venezuela and ongoing conflict in the Middle East make it impossible to predict future oil prices. People dont want to change prices and then have to reverse themselves right away.
A supplier suggested that ExxonMobils limited mark-up may have been calculated to encourage Group II hikes, which in turn might make Group I stocks more attractive.
If Group II prices went up, I think youd see some blenders who have switched to Group II going back to Group I, he said. I dont know of anyone using Group II that would not have that flexibility. In contrast, he added, Group II-plus stocks are practically required for 5W-30 and 5W-20 motor oils.
Suppliers and purchasers generally agreed that Group I producers may not raise prices, as much as they would like to.
We have not moved upward but we would like to, one supplier said. Were kind of hanging tight and evaluating the marketplace. We still see lower margins and high costs and therefore we are almost looking to increase, but we need to have the right timing.
Timing or perhaps more help from the market leader.
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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