U.S. Base Oil Price Report


On Friday, Flint Hills Resources announced that it was lowering two of its posted prices, thus joining the growing list of Group II producers that have recently issued reductions.

FHR adjusted its 100HC down 18 cents per gallon to $2.84/gal and reduced 600HC by 10 cents to $3.59/gal effective Sept. 7. Other grades were unchanged.

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Chevron is the only remaining major Group II producer that has yet to follow suit in this latest round of price amendments. Market sources doubted, however, that Chevron would readily push prices down any time soon, since it had only recently increased its postings.

Apart from this weeks price action, overall paraffinic business remains somewhat lackluster, suppliers said. Contract activity, as well as pure spot trade, is sluggish – just gearing up from the long Labor Day holiday. Sources suggested that consumers requirements are steadily increasing, and by the end of September orders should be back to seasonal expectations.

On the naphthenic side, price opposition emerged following last weeks report indicating that pale oil 60 values resided on average around $3.25/gal. Based on fresh market input, price assessments are pegged lower by 10 to 15 cents/gal in the Gulf Coast region, or around $3.05 to $3.15/gal. Conversely, a few suppliers confirm that a portion of business was concluded at $3.20 to $3.35/gal. A number of sources further speculated it was likely that no business is being concluded at $3.50 to $3.60/gal.

Although demand remained fairly robust for 60 vis pale oil, buying interest has steadily trailed off its high seen earlier in the year and all through 2006. The slight drop-off in price stability is attributed to competitive selling by a few producers, the sluggish economic scene and the lack of hurricanes so far this season.

Despite the decline in pale 60 values, there are pockets of supply tightness, and several producers are unwilling to participate in low-ball price activity.

Regarding the overall naphthenic sector, most players agreed the supply/demand picture is balanced. All sources concurred that recent increases of around 10 cents/gal for all pale grades are sticking. Demand is ramping up for heavy pales, 2000 vis plus, given stronger demand stemming from the tire segment.

In other industry news, Ergon said its 11,300 barrels per day Vicksburg, Miss., facility would be in turnaround for about four weeks commencing in early January for planned maintenance. The shutdown is also for preparatory tie-in work in advance of an expansion, which is to be completed during third quarter 2008 and will add another 7,600 b/d to overall production capacity. This scheduled outage adds to a list of other planned downtimes which will unfurl starting in October.

In the meantime, Citgos 9,500 b/d Lake Charles, La.,plant is scheduled to be taken off line in late September for approximately three to four weeks for maintenance. Sources said that the ExxonMobil 16,500 b/d Baton Rouge, La., facility was taken off line in mid-August for an extended planned outage; its due back on stream in late September.

At the close of the Tuesday NYMEX session, light sweet crude settled at $78.23 per barrel,by 2 cents a record closing price, and a gain of$3.15 per bblover the $75.08/bbl close a week ago.

Carolyn L. Green, based in Houston, can be reached at carolynlgreen@gmail.com.

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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