ExxonMobil raised posted prices Monday, triggering the first round of base oil price hikes in the United States in seven weeks. The markups had been much anticipated, due to the squeeze that rising crude oil costs had put on base oil margins. By yesterday, the markets players were already looking ahead, wondering whether any more movements are likely before the end of the year.
This weeks increases suggested that demand is tightest for Group II and Group II-plus oils and for high-viscosity Group I stocks. Group I producers added a nickel per gallon to cuts of up to 350; 7 cents to high-viscosity neutrals; and 3 cents to bright stock.
ConocoPhillips and ChevronTexaco raised their Group II postings by 7 cents. Motiva went up 7 cents on its Group II 600 cut, but only 5 cents on those between 100 and 305, and just 3 cents on its Group II 70 neutral. Valero raised its only Group II posting by 5 cents. Motiva and ExxonMobil raised their Group II-plus postings 7 cents.
Citgo said it had not yet decided about changing its postings.
This weeks increases surprised no one. Industry sources had been predicting a price hike for a few weeks, noting that crude costs had climbed to the $30-per-barrel range since the prior increaseand pinched base oil margins.
Ironically, crude prices have been dropping this week. The price on the New York Mercantile Exchange dropped briefly below $28 per barrel yesterday – its lowest level in seven weeks – before climbing to $28.07 per barrel, a loss of 27 cents on the day.
Some sources speculated that the easing of crude costs may keep base oil prices from rising again this year.
My question is, are we done? one buyer said. Demand usually drops off during the fourth quarter, so I think this might be it for the year – if crude remains under $30.
Some said that crude prices are the crucial factor but were loathe to predict what might happen to those prices.
It all depends on where crude goes, a marketer said. It might continue falling if theres a resolution to the situation in Iraq, or it could spike up again if there isnt. You expect to see less price pressure when things slow down in the winter, but Ive seen price increases in December. Its just impossible to predict.
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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