Base Oil Price Report


Ergon raised prices for naphthenic base oils 5 cents per gallon Friday, the latest in a series of sometimes disjointed movements for pale oils. Suppliers said supply for light grades is tightening, while heavy oils are flush.

In other base oil news, Sunoco said it plans by the end of this week to restart the propane deasphalting unit at its Tulsa, Okla., refinery, enabling it resume limited bright stock production after a fire two weeks ago.

Prices for naphthenic base oils have been more active in recent weeks, although movements have not been as uniform as usual. Most suppliers seemed to join a round of increases that began in February, ending three months of price stability for pale oils. Market sources said one marketer announced further markups in March, but then did not seem to follow through on them. Another supplier raised prices in three waves between earlyMarch and last week. Most of its customers received one increase, but some had two.

Marketers said several factors have driven the recent hikes. First is the cost of crude oil, which last month rose to its highest level since the start of the war in Iraq. The second factor is increased prices for paraffinic base oils. Observers say naphthenic prices now track paraffinics more closely than they did in the past.

Finally, sources say, supply of lighter naphthenics has tightened in recent weeks, presumably because final production from Shells Martinez, Calif., plant has finally worked its way out of the market. Shell closed the plant in September but reportedly churned out a few extra months of supply before shutting down. Martinez produced primarily 60-weight oil that was largely used as electrical transformer oil.

It took awhile but the market has finally used up the inventories from Shell, one marketer said. As a result, supply of 60 and 100 has gotten very, very tight, and its possible that well be looking at a shortage in the future.

More than one naphthenic supplier said it is turning away inquiries for light-grade oils. On the other hand, the market has an abundance of heavy naphthenics.

Everybody is trying to make as much transformer oil as possible, another marketer said. But when you do that, you also increase your output of other grades, such as 750 and 2,000. Thats why were swimming in heavy grades now.

Sunoco spokeswoman Jessica Klassen said the Tulsa refinery remains on schedule to bring up the deasphalting unit that was damaged by a March 23 fire. Though separate from the refinerys base oil plant, that unit provides feedstock used to make bright stock. The plant will begin making some bright stock when the deasphalting unit is started at the end of this week, Klassen said, but will not return to full production until the unit is again operating normally. That is expected to take approximately one month.

Posted prices for paraffinic base oils were unchanged this week. The price of crude on the New York Mercantile Exchange closed at $35.10 yesterday, down $1.13 from 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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