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Base Oil Report


This is the time of year when, in many areas of the country, the tree foliage starts to change colors and the first few leaves flutter delicately to the ground.

In years past, the arrival of fall and an accompanying decline in base oil demand sometimes also brought about drops in pricing.

This year, values remained fairly stable in the weeks leading up to the official start of the season, and there were actually two price increase initiatives that surfaced in the late summer: One introduced by Chevron and a second one by Kleen Performance Products in late July.

Both base stock suppliers announced 10 cent-per-gallon posted price increases for a majority of their base oil grades.

The upward adjustments were thought to have been driven by limited domestic supply, healthy demand and intermittent spikes in raw material costs.

A majority of paraffinic and naphthenic producers and rerefiners reported lean inventories, with little to no product to offer for spot transactions, a situation that drove spot indications up from June until early August, and extended the tight supply/demand season slightly beyond the typical deadline.

In mid-August, however, many participants were taken by surprise when Motiva introduced a posted price decrease of 5, 10 and 21 cents per gallon, depending on the grade, effective August 15.

Sources explained that the producers intention was to keep postings relevant, and that the downward revision acknowledged the market direction and a seasonal slowdown.

Flint Hills Resources followed on Motiva’s heels with a price decrease of its own, lowering its Group II base oils by 5, 11 and 22 cents per gallon on August 21.

With fundamentals presenting slightly different scenery from years past, and crude oil values deemed rather volatile, market players were eager to gather as much market intelligence as possible to be able to predict trends and make appropriate decisions, whether seasonal changes arrived at the expected time or not.

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