ExxonMobil on Friday announced that it was raising the posted price on one of its Group II-plus base oils by 15 cents per gallon, the first price movement in the U.S. market in two months. Other suppliers of Group II-plus and Group III oils followed with their own double-digit increases.
ExxonMobils increase, which took effect Monday, applied only to EHC 45, its 4.5 centiStoke Group II-plus oil. Motiva added 10 cents yesterday to the posting for its lone Group II-plus product, which has a similar viscosity. ConocoPhillips and SK said yesterday that they will raise all Group III prices by 15 cents, effective tomorrow and Friday, respectively. There was no word of action by Calumet, which also posts a price for a Group II-plus oil.
Suppliers attributed the hikes to tight availability of affected grades, which they said has been caused by a compilation of factors, including strong demand and allocations imposed by ExxonMobil in September. In addition, operational issues have reduced output at SKs plant in Ulsan, South Korea, and forced the refiner to advance to April a maintenance turnaround that had originally been scheduled for June, market sources said. The company reportedly has worked to protect contract customers but is said to be avoiding new or spot sales for the moment.
The hikes raised eyebrows on some buyers, who noted that margins were already extremely high.
When you take into account how much [crude] oil and feedstock prices have dropped, [base oil] margins are about twice their historical average, one buyer said. Its true the cost of natural gas is up, but not enough to support those margins.
The price of crude on the New York Mercantile Exchange closed yesterday at $58.14 per barrel, according to Bloomberg. That was $3.23 lower 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.