Base Oil Price Report


Motiva surprised the U.S. base oil market last week by announcing cuts on posted prices for Group II and Group II-plus base oils. Meanwhile, several naphthenic suppliers continued the more common recent trend, announcing markups for pale oils.

Motiva said its cuts, announced Friday, were aimed at encouraging motor oil blenders to switch early to formulas that meet the new GF-4 standard for passenger car engine oils. The American Petroleum Institute has scheduled a July 31 starting date for commercial licensing of GF-4 oils, whichare expected to require increased levels of premium base oils.

To date, Castrol and ExxonMobil are the only major companies to announce plans to launch API-licensed GF-4 oils, saying they will do so in August. Pinnacle Oil, an independent, said it would begin selling oils that meet the standard – but presumably would not yet bear the API starburst – in mid-July.

Motiva is chopping 5 cents per gallon off its posted prices for Group II oils with viscosities between 70 and 305, and lowering prices for its Group II 600 and Group II-plus oils by 2 cents per gallon.

As of yesterday, no other Group II suppliers had announced changes, with some going so far as to say they plannednot to lower prices. Buyers and sellers expressed surprise at the decision, noting that pricing momentum for base oils has been all upward this year. Some observers have been predicting further markups in recent weeks, though others have backed off such projections since crude oil costs peaked earlier this month. One buyer told Lube Report that Group II supply appears flush, though suppliers denied that that is the case.

Its a pretty interesting thing for them to do, one marketer said yesterday. I think everyone is interested to see if anyone else follows their lead.

Ergon, the continents biggest naphthenic supplier, announced price hikes ranging from 7 cents to 9 cents per gallon, effective July 1. The increase, announced last week, was the companys fourth of 2004. Also raising prices on pales were Nynas (5 to 7 cents per gallon, phased in over the first half of June) and Calumet (7 cents across the board, effective July 2.)

Naphthenic marketers said the increases were due to a combination of strong demand and high crude costs.

Really, I still think we havent caught up with crude yet, one marketer said. Ive been telling people that these prices would be appropriate for 33- to 35-dollar crude, and obviously crude is above that. The price of crude on the New York Mercantile Exchange closed yesterday at $38.25 per barrel, 73 cents higher than a week ago.

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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