Rising prices have been the theme for the U.S. base oil market this year, and the trend continued the past week – in all kinds of ways. ExxonMobil announced increases to its paraffinic postings Friday, and most other principal suppliers followed its lead. At least two naphthenic base oil suppliers raised their prices, too. And to top it all off, crude oil prices reached record highs yesterday.
This weeks movement on posted paraffinic base oil prices marked the fourth round of increases this year and the first since mid-May. ExxonMobil added 7 cents per gallon to its posted prices for solvent neutral 100 and bright stock, a nickel to all others. Calumet, ChevronTexaco, Citgo, ConocoPhillips, Sunoco and Valero also announced markups ranging between 5 and 7 cents.
Only Motiva departed from the pattern, announcing an across-the-board increase of 4 cents per gallon. Several observers interpreted the narrowness of its hikes as a continuation of the strategy it employed when it loweredprices in late June. At the time, the Group II supplier said it was taking the action to encourage motor oil blenders to switch to the new GF-4 passenger car motor oil standard, which requires increased amounts of premium base oils. Motiva ended up being the only company to lower its postings.
Flint Hills Resources was the only large paraffinic supplier not to join the latest round of increases, but it indicated it planned to do so later this week.
Separate from this round of increases, Valero had previously said it would raise its posting for solvent neutral 100 by 5 cents per gallon, effective today. The company attributed that movement to strong demand. The markups it announced today added another 7 cents to the posted price for that product.
Cross Oil announced July 28 it will raise naphthenic prices by 5 cents to 7 cents per gallon effective Thursday. Calumet said it plans later this week to announce pale oil increases of 7 cents that will take effect mid-month.
Suppliers of both paraffinics and naphthenics said the hikes were primarily driven by higher crude costs. Unfortunately for base oil buyers, the latest rounds of increases began before crude reached its new high-water mark. The price of crude on the New York Mercantile Exchange climbed above $44 a barrel yesterday for the first time since trading began 21 years ago. The benchmark price reached $44.24 per barrel before settling at $44.15, $2.39 higher than a week ago.
Although the market is feeling waves from the financial problems besetting Russian petroleum giant Yukos, analysts said the sky-high level of prices is due primarily to strong global demand and concerns that supply will be unable to satisfy it. Several members of the Organization of Petroleum Exporting Countries were quoted this week as saying that the cartel is already producing at near capacity and is powerless to reign in prices.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.