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Base Oil Report

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Just as U.S. base oil market players were wrapping up a balmy spring buying season and preparing for the onset of the typical summer lull, ExxonMobil stepped out with a price initiative that few had expected.

The refiner called for an increase of its API Group I posted prices by 10 to 15 cents per gallon, depending on the grade, on May 23, according to sources. All of the producers Group II+ postings were also lifted by 8 cents per gallon.

Hot on the heels of that announcement, Chevron came out with an across-the-board, 10 cent per gallon hike for its Group II West Coast base oil postings, effective May 27.

Market players said that it was surprising that ExxonMobil had initiated an increase – and even more baffling that Chevron would also be seeking an increase when the producer is about to introduce a significant amount of Group II oils from its new plant in Pascagoula, Miss., which has wrapped up construction. If anything, participants would have expected some competitive price action before the 25,000 barrel per day plant achieves full operation late this month or in early August.

One of the main drivers for the price hike was an increasingly heated supply and demand scenario, which seemed to be particularly snug within the Group I segment and was likely behind ExxonMobils overture, sources suggested.

The other Group I producers quickly reacted as well, with HollyFrontier, Paulsboro Refining and Calumet lifting prices by 10 to 15 cents per gallon shortly after ExxonMobil did.

Calumet also increased its Group II postings, by 10 cents per gallon, and was striving to catch up with customer orders as it had just restarted its Group I and II plant in Shreveport, La., on May 21 following a routine turnaround.

Buyers were bracing for continued tightness in the Group II segment, as the Excel Paralubes refinery in Westlake, La., which is shared by Phillips 66 and Flint Hills Resources, was expected to be taken off line for an extended 58-day turnaround starting in June.

Interestingly enough, at the time of writing, neither Flint Hills nor Phillips 66 were seeking any price revisions for their Group II oils. Motiva also played it cool and abstained from moving its postings, adding to the mystery of the rationale behind the latest round of pricing actions.

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