Market Topics

Base Oil Report


Regular readers of this column may have noticed a blip last month on the accompanying graph. Whereas the graph in the September issue showed the spread between API Group I and Group II prices bulging in April and again in July, the October version, like this months, shows the spread remained largely consistent over the past nine months.

The shift in these perspectives is due to a change in the methodology we use to determine the base oil price points each month. That, in turn, reflects the fact that comparisons between grades are not as simple as in the past.

When this column was first published in February 2002, the prices graphed for Group I and Group II base oils reflected the lowest U.S. posted price for each group. It was an easy approach and, for several reasons, also logical. First of all, for most of that time the lowest priced grade for each Group happened to be 100 SUS or 150 SUS, so the graph ended up comparing prices for like viscosity grades. In addition, Group I 150 was traditionally the workhorse grade in terms of volume, and therefore a benchmark in pricing analyses.

Over the past year, however, those rules of thumb have become skewed. The lowest prices for Group I and Group II now most often attach to the mid-viscosity grades, in the range of 200 to 375 SUS. Not always, however; there was a period at the end of 2004 and beginning of 2005 when the lowest price Group II was a 105 SUS. In that case our chart showed prices for a mid-weight Group I and a lightweight Group II – not a meaningful comparison, in terms of formulating.

Finally, U.S. capacity for Group II now exceeds Group I, and mid-grades appear to be the workhorse products in the former category.

Taking these changes into account, the graph accompanying this column now shows the lowest prices over the past year for each API Group in the mid-viscosity ranges – that is, between 200 and 350 SUS. Its an example of changes needed to keep up with the evolving base oil market.

Related Topics

Market Topics