U.S. Base Oil Price Report


Although crude values have soared to new highs in recent weeks, most U.S. base oil producers have yet to react by adjusting posted prices. The exception is Sunoco, which announced that it will raise its heavy viscosity paraffinic (SN500)and bright stock postings by 15 cents per gallon on Thursday, Nov. 1. Other producers continue to keep a close eye on upstream developments, saying they have not reached a decision on which route to take to help relieve the sting of rising operating costs.

Buying interest perked up in recent weeks, said a number of sellers. Improved orders were largely ignited on speculation that base oils prices could inch up following the substantial gain in crude and vacuum gasoil prices.

Although all naphthenic producers raised prices during October by 10 to 15 cents/gal, fresh talk emerged this week indicating that the steep rise in crude oil costs is already putting the squeeze on margins.

In other news, the Calumet expansion under way at the Shreveport, La., facility should be completed by year end. New production output should become available and ready for market consumption around February, company sources said.

On Monday, light sweet crude surged above $94 per barrel, propelled higher on news that state-owned Petroleos Mexicanos, or Pemex, shut 600,000 barrels of daily output as a storm moved through its production fields in the Gulf of Mexico. Also, the weak U.S. dollar lent a helping hand in driving crude prices to record highs.

“There is no shortage of news that speculators can use now to push oil prices higher,” said a New York analyst.

The dollar’s descent against other major currencies has drawn investors to crude futures as a hedge against the weakening currency, and made dollar-denominated oil futures less expensive to people dealing in other currencies, said a commodities strategist with the Commonwealth Bank of Australia in Sydney. An American analyst also weighed in by saying that the weak dollar is the driving force behind rising crude.

Despite oil’s relentless march higher in recent weeks, many analysts argue that the price increases are being driven by speculation, not market fundamentals. Bullish news headlines out of Turkey, Iran and Mexico contribute to this buying frenzy, these analysts argue.

On Tuesday, crude values retreated, shedding about $3/bbl from Mondays close. A large Wall Street company said that it expected prices to steady or drift slightly lower in coming weeks, stating there are no solid fundamentals that could sustain crude at levels around $93 to $95 per barrel.

The verdict is out whether crude values will rise or fall in the next several weeks.

At the close of the Tuesday NYMEX session, light sweet crude futures settled at $90.38 per barrel, a steep gain of $5.11 over the week-ago close at $85.27/bbl.

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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