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Base Oil Report


With the upcoming changes in production capacity slated for the U.S. base oil market, players have been abuzz about who will be taking the role of conductor in terms of API Group II price initiatives in the future. Will it be Chevron, now poised to bring 25,000 barrels per day of new capacity on stream in Pascagoula, Miss.? Will it continue to be Motiva, with 40,300 b/d in Port Arthur, Texas? Will ExxonMobil take over, once it completes its Baytown, Texas, expansion in 2015?

In recent years, Motiva, being one of the major producers, has often taken the lead when it comes to initiating Group II price movements, with others quickly following in the suppliers footsteps.

This spring season, however, the situation was slightly different, in that Chevron was the one to raise the baton when the time arrived to instigate price adjustments.

While many participants expected price revisions, a few were surprised that it was Chevron who spearheaded the movement by stepping out with a fairly hefty price initiative in early March.

The producer lifted posted API Group II prices by 25 cents to 30 cents per gallon on March 5, and it took players some time to react, with Motiva and Phillips 66 only stepping out with price hikes three weeks later.

However, just as many insiders had predicted, these increases were more moderate than Chevrons, with Motiva and Phillips 66 lifting their Group II prices between 8 cents and 20 cents per gallon on March 26.

The remaining suppliers – including ExxonMobil, Flint Hills, Calumet and SK – joined the chorus shortly after with announcements of their own, with most products in the Group II, II+ and III categories going up by 5 cents to 20 cents per gallon, depending on the producer and the cut.

Within the Group I segment, ExxonMobil, Paulsboro, HollyFrontier and Calumet upped prices by 10 cents to 15 cents per gallon, with slight variations on the theme, and implementation dates arranged between April 1 and April 8.

There is no doubt that given the upcoming changes in supply dynamics, base oil producers will be trying out different cadences until a new rhythm emerges. Finding out which producer will likely set the tone in regards to pricing will be one more discovery that the market will have to make.

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