The summer was about to come to an end without too much excitement in the base oils market-with posted prices remaining stable and demand showing the expected slowdown ahead of the fall season-when Chevron surprised many participants with a posted price increase.
Chevrons initiative-which went into effect on August 24 and lifted its API Group II grades by 20 cents per gallon-was thought to have been prompted by an upcoming turnaround at the producers Richmond, California, base oil plant this month.
The shutdown would potentially take 20,700 barrels of Group II oils per day out of the U.S. supply system and already had some effects on product availability ahead of the outage, particularly for the heavy-viscosity cuts.
According to sources, Chevron placed its 600 neutral cut on allocation in early September, and other suppliers reported tight positions, but no other price increase followed.
Other grades were deemed more plentiful, and as a result spot indications for these oils edged down throughout the second half of August and early September.
The overall downward price trend on the spot front was one of the reasons why the Chevron move was so unexpected, but it was also thought to have staved off a general posted price decrease.
A certain sense of caution was also prevalent due to volatility on the crude oil front, as falling prices could exert further downward pressure on base oil postings moving forward.
While it is always difficult to predict what direction prices may take in the near future-and there is always the chance of an unexpected bolt from the blue-historically prices have tended to decline as the market enters the last quarter of the year.
But seasonal cycles are not the only determining factor for pricing trends. Players have to be prepared for any eventuality that comes along and apply their know-how to handle the challenges that may catch them off-guard.