For a change, the U.S. base oil market was quiet last week, the first in a month to pass without price changes.
Suppliers expressed varying opinions about the desirability of the calm, with some saying further price hikes are warranted while others said they would prefer stability.
Not since early April had a week passed without changes in U.S. postings. Since then, the market has seen Group II-plus price increases by ExxonMobil, mark-ups by Group II suppliers and a round of Group I hikes led by ExxonMobil. Naphthenic base oil prices also escalated during that period.
Suppliers agree that the next price move is still likely to be an increase, primarily due to crude oil costs. Crude prices on the New York Mercantile Exchange closed Tuesday at $29.32 per barrel, up 98 cents on the day and nearly $3 over the past week.
Theres definitely room for another increase, said one marketer, adding that suppliers, at least in the Group I end of the market, will as usual wait for ExxonMobil to lead the way. I dont understand why they havent moved. I cant see how they cant move. They could raise prices and it wouldnt affect their market share at all.
Some other suppliers said they dont necessarily expect prices to rise immediately – and that they would not mind if they dont.
I think a lot of people are okay with things the way they are right now, one marketer said. While acknowledging that gross base oil refining margins have dropped significantly from last year, he noted that they are not especially low compared to longer term trends.
Margins are down to around 53 cents per gallon, he said. Thats a lot lower than last year, when we got up around 80 cents. Historically, though, I think something like 60 to 62 cents is more common. We got down in the 30s a couple years ago. That was unacceptable. Right now, though, I think people would prefer to see some stability.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.
|