In a popular game show aired on National Public Radio called Wait Wait, Dont Tell Me, contestants are told three pretty outrageous stories, but only one of them turns out to be true. Contestants who can tell truth from fiction win.
If one of the stories told to base oil market participants had been about base stock prices moving up at the start of the year, players would have most likely dismissed it as fiction. After all, prices tend to decline at the end of the year, with suppliers striving to place excess inventory, buyers looking for year-end deals, and the downward trend persisting well into January.
Surprisingly, though, this year the narrative about prices edging up turned out to be true, defying most historical trends. In contrast to Januaries past, posted values gravitated upwards during the first few weeks of 2017, mostly driven by firmer crude oil and feedstock costs.
According to reports, the first producer to step out with an increase was ExxonMobil, who lifted all of its API Group I prices 20 cents per gallon, with the exception of bright stock, which moved up 15 cents on Jan. 1.
Along similar lines, HollyFrontier, Paulsboro Refining and Calumet lifted their Group I postings by the same amounts as ExxonMobil between Jan. 3 and 6.
In the Group II/II+/III segments, ExxonMobil, Flint Hills Resources, Calumet, Motiva, Phillips 66, SK, Kleen Performance Products and Avista lifted their prices between 5 and 20 cents per gallon, depending on the grade, with implementation dates ranging from Dec. 19 to Jan. 18.
On the naphthenics front, Ergon, Cross Oil, Calumet and San Joaquin Refining all raised prices by 20 cents per gallon across the board between Jan. 3 and 13.
These price movements are just another reminder that what used to be considered typical market behavior may no longer apply. Both producers and consumers have to be constantly aware of underlying conditions as these may change fast and quite unexpectedly, rendering a true and proven theory completely invalid.