Base Oil Price Report


Producers of Group II-plus base oils lowered posted prices the past week, moves viewed as reaction to competition by Group III stocks from South Korea.

The markdowns, which began Friday, were the first price movements in the U.S. market since August and the first reductions since February 2002. Observers said it was questionable whether prices in the bigger-volume categories of Group I and Group II would follow.

ExxonMobil was the first supplier to lower its prices, announcing Thursday that it would chop 10 cents per gallon off the posting for its 4.5 cSt stock and 8 cents off its 6 cSt, effective Friday. Motiva reduced the posting for its 4.5 cSt fluid by 10 cents Monday. Sources said ChevronTexaco also lowered the price of its lone Group II-plus stock, although it was unclear whether the company posts a price for it. Petro-Canada makes Group II-plus but does not post prices.

Observers said ExxonMobil was reacting to ConocoPhillips, which recently began selling Group III oils imported from South Koreas S-Oil Corp. Lithcon was already selling Group IIIs produced by another South Korean company, SK Corp., but ConocoPhillips postings are 20 cents per gallon lower for comparative products. ExxonMobils Group II-plusses are priced approximately 50 cents lower than the S-Oil Group IIIs, but lube manufacturers said they can blend a Group III with a Group I to make a stock equivalent to Group II-plus.

I think ExxonMobil was reacting to these very competitive prices that are available for Group IIIs, one buyer said. They recognize it as competition and they reacted.

Another buyer noted that SK is due next year to open a second base oil plant in Ulsan with capacity to produce 6,000 barrels per day of Group III, mostly for export. This buyer predicted that increased exports to the United States may push prices for Group II-plus and Group III down further.

We think this is just the first step in a Group III [and Group II-plus] pricing war, the buyer said.

Buyers said they would welcome reductions in Group I and Group II prices but were not necessarily expecting them.

I think that thats really a separate market [from Group II-plus and Group III] and would not expect them to move together, a buyer said.

Crude oil costs eased in recent days, with the price on the New York Mercantile Exchange closing at $29.88 per barrel yesterday. That was $3.24 less than a week earlier.

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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