Suppliers attributed some of the brisk activity to spring retail motor oil promotions and strong U.S. auto sales, which resulted in fairly balanced base oil stocks overall. The start of the summer driving season was also expected to see refiners slightly reduce base oil output in favor of transportation fuels.

Demand of the heavier cuts continued to be predominant, while requirements for the lighter grades were healthy but not buoyant. Light-vis cuts, being more readily available, were heard to be trading at deeper discounts on a spot basis. Nevertheless, general fundamentals were deemed quite satisfactory in both the naphthenic and paraffinic segments, and suppliers were reluctant to acquiesce to any large decreases.

As a result, prices maintained a steady course in May and early June, following a string of increases on paraffinic postings which spanned from February to April. The only exceptions were two isolated adjustments: Flint Hills decreased four API Group II postings by 10 cents per gallon in early May, while Phillips 66 initiated a similar revision a month later for two of its Group II cuts. The moves were likely prompted by a desire to align indications with general market prices – rather than by any particular change in market conditions – and were not immediately replicated by other suppliers.

Market players agreed that no major factors were pulling prices in either direction, and saw no reason to adjust the prevailing pricing structure. One producer said it best, in a thought shared by a majority of suppliers: Theres no need to rock the boat.

However, the first signs of summer, when activity tends to slow, have become apparent. A very limited number of product inquiries emerged in early June, and it was generally felt that July would slacken in term of orders. It may be time to think of ways to attract more business, which could include a revision of pricing, but it is still too early to say whether these measures will be necessary.