Base Oil Price Report


U.S. lubricant blenders may be looking wistfully to Europe these days.

Despite recent drops in domestic U.S. base oil prices, the spread for European exports has been unusually wide for the past year. Wide enough to make importing seem a bargain, even after freight costs and duties.

Still, importing involves complications that make it logistically difficult, and opinions vary as to whether the European market will affect prices in the United States.

Prices for base oil exports from the Mediterranean – the source of Europes Group I surplus – are currently running in the range of $220 per ton, sources say. That amounts to approximately 73 cents per gallon, compared to the lowest U.S. posted price — $1.10 per gallon.

Of course, importing incurs additional expenses – roughly $40 per ton for freight and an additional $30 per ton for duties, unloading services and storage fees. That adds another 23 cents per gallon, but still leaves import costs at least 14 cents below posted prices for domestic base oil.

Thats a big difference, said one large U.S. base oil purchaser. I think arbitrage starts to make sense when the spread [between U.S. posted domestic prices and European exports] gets to 25 cents per gallon. Were looking at more like 40 cents, so thats pretty attractive.

Indeed, sources say that spot purchases of European exports have increased during the past year.

That has to exert downward pressure on U.S. prices because U.S. producers – especially ExxonMobil – dont want to lose market share, said the purchaser, who, like others interviewed for this article, spoke on condition that he not be identified.

Another source added that blenders would like to see Europe play more of a role in the U.S. market. Because ExxonMobil has such a large share of the U.S. market [40 percent], theres a lot of people that would like to weaken their influence, he said. Theyd like be able to wave some lower prices in ExxonMobils face to put pressure on them.

Marketers noted, however, that importing has inherent obstacles. One is the large amount of tankage needed to receive the volumes of fluid involved in shipping. Perhaps more problematic is the fact that European refiners generally have not had their products certified by the American Petroleum Institute; to these refiners, the sales volumes involved in spot export deals do not justify the expense of tests required for certification.

Consequently, these imports are excluded from most of the U.S. market for automotive lubricants.

Especially for things like motor oil, marketers have their formulas and they cannot just switch willy-nilly from one base oil to another, a base oil trader said. As a result, he said, only a few U.S. blenders make spot purchases of European exports on anything approaching a regular basis. Its not easy or [European exports to the U.S.] would be like water flowing downhill.

Given todays spreads, U.S. blenders surely wish it were so.

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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