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Base Oil Report


Unusual things are happening everywhere. Take the case of the python that fell from a ceiling during a meeting at a Chinese bank and was captured on video.

Or the one of a Kentucky jailer who found that a stranger had broken into her home and thoroughly cleaned her house before helping herself to a shower and a nap in her bed, Goldilocks style.

In the base oil market, some atypical movements have also taken place over the last couple of weeks. First, naphthenic producers stepped out with price increases at the end of September and early October. Shortly after, paraffinic suppliers followed with a similar move.

The price adjustments in both camps were slightly unusual because the base oil market is prone to oversupply in the last quarter of the year, making markdowns much more common than hikes during this period.

However, escalating crude oil and feedstock costs this year prompted suppliers to take a different route than in years past.

With oil prices reaching four-year highs in late September, refiners faced the fact that the run-up in crude, vacuum gas oil and diesel costs was hurting their margins. Price adjustments were much needed to improve returns and dissuade producers from streaming feedstocks into increased fuels output, to the detriment of base oil production.

Naphthenic producers Ergon, Cross Oil, Calumet and San Joaquin Refining all raised prices by 15 cents per gallon between September 28 and October 4.

On the paraffinic front, ExxonMobil stepped out with a 20-cent-per-gallon increase in early October. Several other producers followed with 10- to 20-cent hikes, confessing that they would rather not raise prices in the last quarter, but had given the adjustment careful consideration.

Of course, it raises the question of whether those increases will stick, especially if base oil demand falls further.

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