Base Oil Price Report


U.S. paraffinic base oil suppliers carried on with a round of price hikes begun last week. At the same time, crude oil costs surged to new records, raising worries that base oil prices may still face upward pressure.

Group II marketer Flint Hills Resources on Friday increased the posted price for its 70 neutral stock by 12 cents per gallon and added 14 cents to all others. Group III importer SK Corp. imposed an across-the-board hike of 10 cents per gallon Monday, while ConocoPhillips hiked all of its Group II and Group III postings by 12 cents the same day. Also Monday, Sunoco added 15 cents to its middle-viscosity grades and 10 cents to lights and heavies.

Chevron raised its Group II posted prices 12 cents yesterday, according to market sources. There was no word yet of changes from Valero.

The increases by Flint Hills Resources, SK, ConocoPhillips, Sunoco and Chevron were in line with those announced by other producers last week. In general, crude oil costs were cited as a primary factor, along with tight supply.

Lubricant blenders say their businesses have been hammered by the continual hikes in base oil prices. Group I postings for the Gulf Coast have risen approximately 92 percent since the beginning of 2004, and Group II prices are up approximately 87 percent.

The base oil suppliers jump right on board whenever there is a [base oil] price increase, one blender said. But [those companies] are a lot slower to raise finished lubricant prices, and it really squeezes the independents. Its been especially tough the last couple years.

Some buyers noted that base oil markups began before the latest jump in crude costs, which reached a peak on the New York Mercantile Exchange of $75.35 per barrel Friday. Analysts tied the latest increases to tension over Irans nuclear program and announcements that Venezuela wants to seize greater control of exploration joint ventures with foreign oil companies. Analysts also cited low gasoline inventories in the United States.

Im really not surprised [about the latest hikes for base oils] because crude is at an unprecedented level, another blender said. And I think [base oils] will probably keep going up.

Crude prices eased a bit this week, apparently due to sales by traders cashing in on profits gained last week. The price on the New York Mercantile Exchange closed yesterday at $72.75 per barrel, according to Bloomberg. That was $1.05 higher than the price a week ago.

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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