The dust had just begun to settle from the most recent round – or was it two? – of U.S. base oil price hikes. Then came an announcement last week of more markups – the second in two weeks by Motiva, which was in the thick of conjecture earlier this month.
The Group II supplier stated Friday that it would add between 5 cents and 7 cents to its posted prices, effective yesterday. Observers said it was difficult to tell whether the company was following the lead of other suppliers, or trying to restore premiums over Group I stocks, or none of the above. Likewise they said it was hard to predict if more increases are in the wings.
March has been a chaotic time for the paraffinic side of the market, which had gone the previous four months without any price changes. The month began with a 10-cent hike just on bright stock. Then Motiva announcedthat it was raising prices March 4 by 5 to 7 cents. Just when it appeared that no other Group II producer – let alone Group I producer – would follow, ExxonMobil triggered a general round of increases. By March 17, every other major marketer except Motiva had followed. Sunoco was the last of thatgroup to move,imposing hikes of 7 to 10 cents.
In a market that normally sees relatively uniform price movements, observers were not sure what to make of it. Had ExxonMobil moved in reaction to Motiva or led a separate round of increases? If the latter, would Motiva move again or stand pat?
It turned out that Motiva did impose more markups. Some observers speculated that it may have been joining the general round of increases that occurred the week before its announcement. Some said it may be trying to restore the Group II premium, which it essentially erased last year. (Until then, the markets lowest posted price for Group IIs had been 9 cents higher than the lowest priced Group I. But a series of moves and non-moves by Motiva left several of its postings near or below those for corresponding Group I products – and significantly lower than competing Group IIs.) Motivas most recent hikes bring its posted prices more in line with those of other Group II suppliers and leave all of its postings above Gulf Coast postings for corresponding cuts sold by ExxonMobil, traditionally the lowest-priced Group I supplier.
Other observers suggested Motiva may be reacting more to feedstock costs. One buyer noted that crude oil costs rose approximately $4 per barrel between Motivas two announcements this month.
If you put aside all the demand and supply issues, its clear that base oil margins have taken another hit the past few weeks, the buyer said.
The question then, is whether Motivas latest increases will be followed by more markups from other suppliers. Heads still spinning, observers seemed reluctant to address that question.
The price of crude on the New York Mercantile Exchange closed at $55.42 per barrel yesterday, 51 cents higher than a week earlier.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.