ExxonMobil announced increases to its U.S. base oil postings Monday, triggering the second round of price hikes in the market in six weeks. Most major suppliers of Group I and Group II paraffinics quickly announced their own markups, with the rest expected to do so within the next several days.
Meanwhile, Group III importer SK said it will lower prices March 15 in response to increased competition.
Posted prices for Group I and Group II oils have already risen twice this year, after just one across-the-board change in the last 10 months of 2003. According to market sources, ExxonMobils explanation for this weeks markups was similar to the one it gave in January. The company cited increased demand, constrained supply and higher prices for gasoline, which represents an alternative product chain.
ExxonMobil added 3 cents per gallon to its postings for light and medium grades, a nickel to heavy neutrals and 7 cents to bright stock, effective March 9. Citgo, Sunoco and Valero followed an identical pattern, with their changes effective today, Friday and Monday, respectively.
Motiva raised its Group II 105 neutral and its 4.5 cSt Group II-plus by a penny, its Group II 145 and 305 neutrals by 3 cents and its Group II 70 and 600 neutrals by 5 cents. ConocoPhillips had not announced changes by the end of business yesterday, and there was no word of changes from ChevronTexaco. Calumet said it will announce increases corresponding to the markets movements next week but had not yet set exact prices.
Suppliers said the increases should come as no surprise, giventhe recent run-up in crude oil costs. The price of crude on the New York Mercantile Exchange closed yesterday at $36.46 per barrel, 18 cents higher than a week ago.
Crude has gone up a few dollars since the January price increase and put a further squeeze on margins, so this should allow us to recoup what weve lost, one marketer said.
Buyers were somewhat skeptical, with some questioning ExxonMobil for citing the same demand-supply factors upon which it explained the previous increase.
They dont want to tie it to crude because they know people will expect prices to fall when crude comes back down, one buyer said. But as far as I can tell, thats the only thing that has changed since the last increase. Certainly demand hasnt changed.
South Korean supplier SK reduced its 4 cSt and 6 cSt Group III postings by 15 and 17 cents per gallon, respectively. It also began posting a price for a 3 cSt product. The companys statement about competitionappeared to refer to ConocoPhillips, which last year began marketing Group III oils in the United States for rival South Korean refiner S-Oil. ConocoPhillips postings have been significantly lower than SKs, but SKs cuts bring the price of its 4 cSt product with 5 cents of ConocoPhillips.
SKs output is scheduled to increase during the second half of this year when it opens a second base oil plant in Ulsan, South Korea.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.