Long-anticipated price hikes for paraffinics hit the U.S. base oil market this past week, as five suppliers imposed markups that generally ranged from 6 to 10 cents per gallon.
Because of a run-up in crude costs that has squeezed refining margins, base oil buyers and sellers have been predicting price increases since early January. Observers generally agreed that suppliers were awaiting movement by market leader ExxonMobil.
As it turned out, Group II supplier ConocoPhillips led the latest round of increases, announcing Friday that it was raising its postings by 7 or 9 cents per gallon, effective Feb. 11.
I guess they just got tired of waiting, one marketer said. With crude up so high for so long, someone was bound to move eventually.
Citgo and ExxonMobil announced Monday that they would raise their postings today. Citgo added 8 cents to all of its postings except bright stock, which went rose just 3 cents. (Citgo was the only principal Group I supplier not to reduce its bright stock posting last month.) ExxonMobils markups ranged from 6 to 8 cents.
Motiva said yesterday that it will raise its postings by 7 to 10 cents, effective tomorrow. Valero joined the trend by announcing increases of 8 cents for bright stock and 7 cents for all other cuts, effective Feb. 17. As of yesterday, there was no word of movements by ChevronTexaco, Sunoco or Calumet.
While this weeks price hikes surprised no one, there were differing opinions about the likelihood of further increases. Some sources noted that gross base oil refining margins had dipped to exceptionally low levels, below 40 cents per gallon, before the latest price hikes and remain below average even now.
This has gotten margins up out of the 30s, one marketer said. But were in the low- to mid-40s now, and thats still pretty low. I dont think theres any way theyre going to remain there for long.
Others suggested that prices were now stable, at least until springtime, when lubricant production in the United States normally begins to rise.
Unless a war breaks out in the Middle East, I wouldnt expect crude to climb any higher, a purchaser said. And as long as it doesnt I wouldnt expect any more [paraffinic base oil price] increases right away.
On the naphthenic side of the market, Valero announced price increases ranging from 3 to 10 cents per gallon, effective Feb. 17. Other naphthenic suppliers had raised prices 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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