Base Oil Price Report


Price hikescontinued to batter the U.S. base oil marketthis week, with ExxonMobil announcing an across-the-board increase of 10 cents per gallon. Calumet Lubricants followed with identical markups of its own, and other suppliers are expected to take similar actions in coming days.

It marked the sixth consecutive week that the market has undergone some form of price increase, and was the second general increase in six weeks by ExxonMobil, not including a 10-cent hike for bright stock aloneat the end of February. So fast and disorganized have the increases come that observers of the traditionally staid market have had difficulty discerning one round from the next, or determining who is following whom.

Still, market sources said ExxonMobils move was not surprising, given the continued volatility of crude oil prices. Some suggested suppliers may be acting somewhat preemptively in case crude costs take off again.

Nobody wants to lag too far behind crude, a marketer said. Thats what happened [to base oil suppliers] last year. The lag is what kills everybody in this industry.

Sources said ExxonMobil announced its latest hikes Monday and slated them to take effect tomorrow. Calumet said yesterday that its posted prices will increase by 10 cents per gallon Friday. There was no word of changes byother suppliers by the close of business yesterday, but several appeared poised for some kind of action. The only question seemed to be the amount of increase on various grades.

The market buzzed with speculation about how Motiva will react. The company has become somewhat of a price leader for the Group II market since expanding capacity at its Port Arthur, Texas, plant last year. Motiva has already imposed two increases in the past five weeks, but its 100 solvent neutral will be posted 9 cents per gallon cheaper than ExxonMobils corresponding Group I offering, once ExxonMobils latest increase takes effect.

Several observers said they could not imagine that such a large anti-premium will last, despite the fact that it was Motiva that eliminated the former Group II premium last year. Based on the markets lowest posted prices for each grade, higher-quality Group IIs traded at a 9-cent premium until the second half of 2004 when Motiva lowered its postings relative to other suppliers.

Having Group IIs priced around the same as Group Is was strange enough, one marketer said. But to have them at a 9-cent discount would be just bizarre. I think theres no question that Motiva will move again.

Crude oil prices set new records this week before retreating a bit. The per-barrel price on the New York Mercantile Exchange climbed to $58.28 Monday, according to Bloomberg. Crude closed yesterday at $55.77, up $1.46 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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