As oil prices continued to skyrocket, U.S. base oil consumers braced themselves for the likelihood of fresh price hikes. They were not surprised when producers indeed stepped out with notices of upward adjustments this week.
ExxonMobil, Motiva, Calumet and Valero announced that they would raise their API Group I, II and II+ base oil postings between 15 and 35 cents per gallon. These moves followed recently issued price hikes presented by most Group I producers and implemented from May 9 to 15.
ExxonMobil has announced that its paraffinic postings will go up effective tomorrow, May 22, sources said. Light vis 100 to 150 grades add 30 cents/gal; 240 to 600 vis grades go up 15 cents/gal; and bright stock rises 20 cents/gal. ExxonMobils Group II+ postings are all to increase 15 cents/gal.
On Friday, May 23, Motiva will increase postings on its Group II Star 3, 6 and 12 by 30 cents/gal, while the Star 4 (105 viscosity) will climb by 35 cents/gal. Group II+ Star 5+ will move up by 30 cents/gal.
Calumet plans to raise postings on all its Group I and II paraffinics by 30 cents/gal, effective May 28.
Valero said its Group I and II light vis (100 to 165) grades will go up by 30 cents/gal, while all other postings will rise 20 cents/gal, effective May 28.
Although naphthenic prices typically move no more than once a month, extreme market circumstances have changed the historic pattern. For a second time this month, naphthenic producers announced increase initiatives that will go into effect in the coming week. Pale oil suppliers agreed that, with crude values nose-to-nose with $130 per barrel, there was no alternative but to adjust prices upward again.
Ergon will boost its light vis pale 60/transformer oil between 26 and 30 cents/gal, depending on customers starting price-points. All other grades will jump by 25 cents/gal. The company confirmed that all increases will be effective Friday, May 23.
Calumet will increase its pale oil line-up by 30 cents/gal across-the-board on May 24.
Cross Oil plans to hike its light vis oils, up to and including 750 pale, by 25 cents/gal, while oils heavier than 750 through 2000 vis will go up by 30 cents/gal, on May 26. The company also said that it has removed temporary voluntary allowances (TVAs) at certain accounts, and by doing so, the total increases could be as much as 40 to 45 cents/gal, depending on grade and customer.
San Joaquin Refining has proposed a round of hikes for May 28. The company plans to push up light ends, including 40 through 100 pale oils, by 40 cents/gal, while 200 vis and heavier grades will increase by 30 cents/gal.
Nynas said it plans to join other naphthenic producers and initiate a round of increases to its customers, but how much each grade will be bumped up is still being assessed by the company.
The spate of posted and spot price hikes seems endless, players lamented. Many concerned U.S. participants concurred that what is happening is unprecedented. It used to be that consumers encountered a price hike or decrease only several times in a year. But this trend has changed in recent months, and now price movements (to the upside) have become a regular occurrence, with hikes being pushed through about every three weeks on average.
The ever-rising value for energy and more specifically crude oil is to blame for the regular climbs in base oil prices, sources asserted.
Strong demand, tight supplies and a volatile marketplace has also attracted the interest of investors – the last main contributor to high prices, Wall Street analysts say. They added that speculators have seized the opportunity by recognizing the flawed fundamentals in the oil market.
Since 2003, the number of oil contracts exchanged on the NYMEX has more than doubled. Money flowing into oil – and commodities in general – has been especially sharp over the last 6 months as investors look for good returns amid falling stock prices and an inflation hedge against a falling dollar.
Such activity has helped push oil prices to nearly $130 a barrel and gasoline to an average of nearly $3.80 per gallon, smashing previous records even when adjusted for inflation, analysts pointed out.
At the close of the Tuesday, May 20, NYMEX session, the front-month June light sweet crude futures settled at $129.07 per barrel, a sizeable increase of $3.27/bbl over the May 13 close at $125.80. Tuesday was the last day of trade for June contracts. The July contract ended the session at $128.98/bbl.
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.