U.S. Base Oil Price Report


Just as the recently implemented round of price hikes was taking hold, ExxonMobil surprised market players with plans to increase posted prices of all paraffinic Group I and II+ base oils by 20 cents per gallon effective tomorrow, Nov. 29. Calumet promptly mirrored ExxonMobils move, raising all paraffinic postings 20 cents per gallon effective Dec. 1.

The announcements were not completely unexpected, said one source, who pointed to rising additive and finished lubricant prices. The source suggested that, with finished lube prices rising, base oil suppliers can be more aggressive in their pricing. Also, margins continue to suffer for all base oil producers, who are struggling with still-high feedstock costs, despite crude shedding several dollars this week. Vacuum gas oil numbers were holding up at around $2.35 to $2.40 per gallon.

Otherwise, U.S. base oil suppliers said that market conditions are generally stable. The previous round of price hikes, implemented within the past several weeks, are sticking so far, and most consumer orders are at scheduled levels.

A few sellers claim that in some situations customer requirements are better than expected, despite the fact that year-end activity usually slows to a grinding halt. But there is no denying that some competitive activity is ongoing, which is troubling to some suppliers. Steep discounts have been offered to potential buyers, sources suggested. However, confirmed business at lower levels could not be identified this week.

In early November, spot offers were pegged at $2.25 to $2.30 per gallon for light vis neutral grades. Recent offers have inched up by 10 to 15 cents per gallon, market watchers said, but are attracting limited fresh buying interest.

On a more positive supply note, producers say that overall inventories are in better balance today and reduced prices are not necessary. Not only has availability of light and mid viscosity base oils snugged up, bright stock is tighter as well.

Crude oil values plunged this week in New York as sliding U.S. equity markets heightened speculation OPEC will increase output to cap prices and bolster global demand.

Consumers worries are growing over an apparent economic slowdown. The stock market has been erratic the past several weeks, vacillating significantly in both directions. News on the housing front remains shaky, while the banks are also dealing with a possible recession. And the unprecedented weakness of the U.S. dollar has driven oil to record highs near $100 in recent weeks.

But in a slight twist of fate yesterday, oil prices took a downward turn, dipping to below $95 per barrel as investors bet that the Organization of Petroleum Exporting Countries next week will boost supply for a second time this year, to cool near-record prices.

Influential Saudi Oil Minister Ali al-Naimi gave nothing away Tuesday about what action the group will take on Dec. 5, but Indonesia’s Oil Minister said he would back an increase of 500,000 barrels per day.

OPEC ministers will weigh the risks of a credit slump and potential recession curbing U.S. demand, against concerns of a supply shortfall during the peak winter demand season.

At the close of the NYMEX session, light sweet crude oil futures ended the day yesterday at $94.42 per barrel, a loss of $3.61 from the $98.03 level reported on Nov 20.

Carolyn L. Green, based in Houston, can be reached directly 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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