Base Oil Price Report


Group I base oil prices are finally going up in the United States, though probably not as much as suppliers had hoped.

ExxonMobil on Monday announced an increase of 5 cents per gallon on all posted prices – including prices for two Group II-plus cuts – effective today. Valero responded immediately, saying it will raise its Group I postings by an equal amount May 6. Previously Valero had hiked the price for its 150 neutral Group II stock by 7 cents.

Citgo and Sunoco have not yet announced changes, but buyers and sellers said they expect those companies to follow ExxonMobils lead. This marked the first increase in U.S. Group I postings in more than a year. Refiners have for weeks been eager to raise prices because margins have been squeezed by a jump in crude oil costs. But refiners also felt constrained from taking any action prior to movement by ExxonMobil, which dominates the market. According to some estimates, the oil giant supplies approximately 60 percent of the Group I base oil sold on the merchant market in the United States.

Given that crude has risen more than 40 percent since January – prices on the New York Mercantile Exchange dropped 28 cents Tuesday to $27.29 per barrel – some refiners had hoped for double-digit increases in base oil prices.

Just a nickel, one supplier bemoaned Tuesday.

Individuals in the market expressed a variety of opinions in recent weeks about why ExxonMobil had not raised Group I prices. Some speculated that the company was overstocked with Group I cuts, and that the situation reflected new motor oil standards that demand more premium stocks.

This week some sources speculated that Group I mark-ups became possible because of recent increases in Group II prices. Group II refiners added 7 cents to most of their postings the past two weeks, approximately doubling the spread between Group I and Group II stocks.

When Group II went up, I think blenders who could switched to Group I, and that [Group I] orders went up, one supplier said.

One large buyer saw other reasons, as well. He noted that prices for European exports have risen by approximately $10 per ton recently and added that further increases are expected.

The pressure from arbitrage is loosening, and crude seems to be sustained at a high level, the buyer said. Everything was just lined up for a price increase.

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

Copyright 2002 LNG Publishing Co., Inc. All rights reserved.
Tim Sullivan, Editor. Lube Report, Lubes’n’Greases Magazine and Lubricants Industry Sourcebook are published by LNG Publishing Co., Inc.

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