Crude prices, however, began falling days before the start of the most recent base oil markup. From a peak above $30 per barrel, crude prices on the New York Mercantile Exchange fell to yesterdays closing price of $26.14, down 81 cents for the day. As a result, base oil gross refining margins have swelled from a below-average level of less than 50 cents per gallon to the mid-60s – substantially greater than the average for the past two years.

But buyers and sellers alike say this doesnt mean that base oil prices are bound to retreat.

I think the drop in crude has definitely changed the momentumso that [base oils]are stable, as long as crude stays in this range, one base oil supplier said. I think refiners are going to stay where they are, perhaps through the end of the year.

Others offered several reasons for base oil prices not to drop right away. Many believe that crude costs remain volatile and unpredictable. Tuesdays drop was attributed to speculation that any U.S.-led attack on Iraq could be at least weeks away. But crude could rise again and eliminate any downward pressure on base oil prices.

Sources also noted that the base oil market is more conservative than the market for crude, with suppliers being much slower to raise or lower prices. Finally, crude costs are just one of the factors affecting base oil prices.

Supply and demand also play a large role, and it looks to us as if demand is still pretty healthy, a buyer said. From that perspective, we dont expect base oil prices to drop any time soon.

In raising its prices, Citgo followed a pattern similar to other suppliers. It added a nickel per gallon to prices for light- and mid-grade neutrals and 7 cents per gallon to its 650 neutral. The company raised its bright stock posting by 3 cents per gallon.

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