Base Oil Price Report


The U.S. base oil market completed its latest round of price hikes the past week. Observers warned that postings could climb further as fuel prices surged in the wake of Hurricane Katrina.

Citgo, SK, Sunoco, Valero and Chevron all raised posted prices by 15 cents per gallon, consistent with a round of markups begun Aug. 18. Citgo, Chevron and SK made their changes effective last Friday, while Valeros and Sunocos took effect Monday and yesterday, respectively.

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Thiscompleted the sixth round of price hikes in as many months and the second in August. Suppliers said there will probably be further upward pressure if fuel prices dont give back the huge increases recorded yesterday. Wholesale gasoline prices jumped more than 40 cents per gallon yesterday – approximately 20 percent – on news that eight oil refineries had closed in Louisiana and Mississippi.

None of those refineries produce base oils. (The eight closed refineries do not include ExxonMobils refinery in Baton Rouge, La., which closed temporarily Monday but resumed normal operations the same day. That refinery includes a base oil plant with capacity of 16,000 barrels per day.) Still, observers said that higher fuel prices will mean increased competition for vacuum gas oil, the feedstock used for both fuel and base oils. Along with rising crude oil prices, steeper VGO costs have been one of the biggest factors behind this years runup in base oil prices.

Unless fuel prices fall back, we could be in for more of the same, one base oil marketer said.

Refinery operators generally did not say when they expect their facilities to reopen. There were no reports of damage within facilities, but some appeared to be sidelined by power outages.

Crude prices also climbed this week on fears that U.S. production will be cut by Katrina. Oil companies were still working to assess the impact on drilling rigs in the Gulf of Mexico, which account for more than 80 percent of U.S. production.

The price of crude on the New York Mercantile Exchange closed yesterday at $70.40 per barrel, $4.20 higher than its price 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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