U.S. Base Oil Price Report


It initially appeared that the U.S. market was entering the early stages of the summer doldrums. But on Tuesday Chevron first grabbed the markets attention with plans to raise its API Group II postings by 20 cents per gallon, then Calumet stepped out with news that it too will lift its paraffinic and naphthenic offerings by 20 cents/gal, quickly followed by Nynas, raising its pale oil prices 20 cents/gal.

Chevron said it would boost postings for its Group II 100, 220 and 600 vis grades by 20 cents/gal, effective June 1. The company noted that the fresh increase was in direct response to improved demand and rising feedstock costs during the second quarter.

The West Coast producer last moved its paraffinic grades on March 30, lowering postings by 40 to 75 cents/gal. At that time, crude values averaged in the mid $30s per barrel, but in recent months, crude prices have averaged closer to the high $50s/bbl.

Calumet said it plans to follow suit and will increase all its Group I and II paraffinic posted prices by 20 cents/gal across the board, effective June 1. The company also added that it plans to lift all naphthenic pale oils by 20 cents/gal on June 9.

Nynas, like Calumet, said it will increase prices on its naphthenic base stocks by 20 cents/gal, also effective June 9.

While its uncertain whether other base oil producers will follow Chevrons lead, a number of key players, including several large buyers, anticipate more news of higher prices to emerge in coming days, particularly if crude oil values continue to escalate.

Apart from this breaking news regarding price changes, conversations among base oil players focused mostly on the improved state of the economy and rising crude oil prices and what this could mean for the market.

On another note, refreshed optimism swept through the U.S. this week on reports that consumer confidence had significantly risen in May – zooming beyond economists expectations, according to a Reuters survey.

The Consumer Confidence Index, which measures how shoppers currently feel about the economy, rose to 28.9 for May, up from 25.5 last month and the highest it has been since last September. But more impressively, the Expectations Index, which measures shoppers’ outlook over the next six months, climbed to 72.3 from 51.0 in April.

In a recent statement, Lynn Franco, director of The Conference Board Consumer Research Center, said that “looking ahead, consumers are considerably less pessimistic than they were earlier this year, and expectations are that business conditions, the labor market and incomes will improve in the coming months. While confidence is still weak by historic standards, as far as consumers are concerned, the worst is now behind us.”

Despite these more positive consumer readings and the recent stock market rally, some economists remain cautious and are not confident that the U.S. economy will fully rebound anytime soon.

Analysts point out that the country still faces a number of challenges, including a still-weak housing market and a bleak job picture.

The latest report on home prices, released Tuesday, was not comforting. Home prices fell at the fastest annual rate on record in the first quarter, though the pace of month-to-month declines continues to slow, according to a closely watched housing index.

Meanwhile, Americans continue to focus on buying necessities as they worry about their jobs. In another Reuters report, economists predicted that the unemployment rate will climb to 9.2 percent in May from 8.9 percent in April, and employers are expected to shed a net total of 523,000 jobs. The Labor Department is expected to release unemployment figures on June 5.

Meanwhile, crude oil values rallied about 9.5 percent last week, boosted by a spate of U.S. refinery problems and unrest in Nigeria, a major oil exporter.

Wall Street investors are drawing strength from the supply cuts issued by OPEC, which total 4.2 million barrels per day since last September. Also, market sentiment that the recession is waning and demand for energy will revive has added a fresh dose of optimism toward investors outlook.

Ministers from the Organization of the Petroleum Exporting Countries (OPEC), which will meet on Thursday in Vienna, are widely expected to make no change to oil supply. This speculative decision is based on higher oil prices, which has helped to mitigate their concerns about overflowing fuel inventories and dwindling demand.

Saudi Arabian Oil Minister Ali al-Naimi said OPEC would “probably stay the course.” He forecasts that crude oil demand will pick up and that oil prices will eventually rise toward $75 per barrel.

Energy analysts too are optimistic that gasoline prices, down significantly from year-ago levels, could boost demand during the U.S. summer vacation season, which typically ends in September.

At the close of the Tuesday, May 26, NYMEX session, light sweet crude futures ended the day at $62.45 per barrel, a gain of $2.80 compared to the settlement a week earlier at $59.65/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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