Base Oil Price Report


ExxonMobil on Monday announced price hikes of 10 cents per gallon for bright stock, the first markups in the United States in four months. Valero quickly followed suit, and other suppliers were expected to do likewise.

Buyers and sellers agreed there was no surprise in the movements, given that bright stock supply has been exceptionally tight. They disagreed, however, about whether other grades are facing upward pricing pressure.

ExxonMobils increase takes effect today, while Valeros kicks in Monday. Citgo, Sunoco and Calumet also produce bright stock but issued no statements about price changes by the end of business yesterday.

Bright stock supply has reportedly been tight for quite some time, and market observers cite several contributing factors. Market capacity has fallen in recent years due to the closure of Group I base oil plants. In the past year, production has decreased further as refiners shifted feedstock from base oils to fuels operations. In addition, the United States has for months been forced to do without a significant source of imports.Brazils Petrobras, a key bright stock supplier,has been hamstrung by maintenance shutdowns and operational problems.

While availability of other base oil grades is looser, suppliers said they also face upward pricing pressure. One marketer noted that fuels margins are fattening again and suggested base oil sellers may have to raise prices to justify their operations.

Buyers were having none of that argument, especially in light of the eight rounds of hikes they endured in 2004.

We had two increases in a row last October, and we were told then that those prices were needed to cover the cost of $55 [per barrel] crude, one buyer said yesterday. Now crude is at $51 and, except for bright stock, its not difficult to find barrels of any grade. There is no justification for raising prices on any other grades.

The price of crude oil on the New York Mercantile Exchange closed yesterday at $51.74 per barrel, 57 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.

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