U.S. Base Oil Price Report


A scattering of posted price changes spread through the base oils market during the past week. Motiva, Holly and Flint Hills Resources jumped on the bandwagon with adjustments ranging from a decrease of 30 cents per gallon to an increase of 40 cents/gal.

These modifications rounded out a series of changes that commenced earlier in the month.

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In the API Group II category, Motiva lifted its Star 3 (70 viscosity) by 35 cents/gal, upped its Star 4 (105 vis) posting by 40 cents/gal, raised Star 6 (220 vis) by 15 cents/gal and bolstered Star 12 (600 vis) by 25 cents/gal. Motivas Group II-Plus Star 5+ rose 15 cents/gal. Motivas increased prices were effective Friday, June 12, the company said.

Holly said it lowered its bright stock posting by 30 cents/gal on June 12, largely keeping in line with the ExxonMobil adjustment reported the week earlier.

Yesterday, June 16, Flint Hills Resources added another 10 cents/gal hike to its 100 neutral posted price. This follows an earlier increase of 25 cents/gal the company implemented on June 1 to the same grade. The current posting for this grade now stands at $2.25/gal.

With the exception of Motiva, which increased its Group II+ posting this week, other Group II+, III and III+ producers and marketers appear to be hold-outs during this round of price hikes. Sources say that it would not be a big surprise, however, if ExxonMobil, ConocoPhillips and SK were to step out with price adjustments to their high-quality base oils in coming weeks, given rising operating costs.

Base oil market participants are keeping a keen watch on upstream developments, while pondering current market conditions. Buyers emphasized that supply is readily available. Suppliers, on the other hand, reiterated that even though demand is fairly understated, customer requirements have steadily picked up over the past several months.

Nonetheless, many production sites continue to be operated below optimum levels in attempts to keep the base oil supply/demand situation balanced. In many cases, plants are heard to be running at an estimated 80 percent of capacity. At some locations, facilities may be operating at even more reduced rates at about 65 percent to 70 percent, sources say, while others are cranking out base oils at rates of 85 percent to 90 percent.

Looking upstream, for many analysts there is no rhyme or reason for crude oil values to shoot up to fresh highs over $73 per barrel in recent weeks, more than doubling from a low in March of $35/bbl. Analysts contend that there are no solid fundamentals supporting higher oil prices, but they generally agree that the trend is up.

Crude last spiked in July 2008, when values skyrocketed to $147/bbl. During that astonishing rise in crude, Congress began holding hearings to decipher whether speculators were manipulating prices.

Then a market correction ensued, commencing a year ago mid-summer and leading crude prices lower. Values continued to tumble, accelerated by the global financial crisis, plunging to multi-year lows below $35/bbl in March. And now the trend is back up, analysts say.

Energy experts say that despite ample oil supply alongside weak demand, there is a great sense of relief knowing that the economy is recovering. This is the bait that likely lured investors back to the oil sector and is the cause for higher prices, analysts suggest.

At the close of the Tuesday, June 16, NYMEX session, light sweet crude futures ended at $70.47 per barrel, a modest gain of 46 cents compared to the week-earlier settlement at $70.01/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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