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Base Oil Report

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By late spring or early summer, most of the activity that characterizes what is probably the busiest time of the year for base oil and lubricant manufacturers starts to wind down. That is why it was slightly surprising to see base oil increases start to bloom as late as May.

A majority of base oil producers announced increases at the start of the month. Opinions about these initiatives were divided-some participants maintained that it was high time for producers to seek hikes, as margins had been squeezed by the relentless climb in crude oil and feedstock values over the previous weeks.

Others thought the movement was premature, and feared that it would discourage orders. This was particularly a concern to many paraffinic suppliers, as the spring season had turned out to be less vibrant than expected in terms of demand.

Yet some players observed that if producers were considering price hikes, this would likely be their last chance to implement changes before the summer doldrums set in.

Chevron got the ball rolling in early May, communicating 10 to 20 cent-per-gallon increases for its API Group II base oils.

Other Group II producers, including Excel Paralubes (Phillips 66) and Flint Hills Resources, ExxonMobil, Petro-Canada, Avista Oil, Calumet and Motiva also lifted postings by 10 to 21 cents per gallon, with effective dates spread throughout the month.

In the Group I segment, HollyFrontier, ExxonMobil, Calumet and Paulsboro raised posted prices by 10, 15 and 20 cents per gallon, depending on the grade and the producer.

Within the Group II+ tier, Kleen Perform­ance Products boosted all viscosity postings by 20 cents, while Motiva increased its Group III oils by 12 cents.

On the naphthenic front, rising crude oil costs pushed producers to seek price hikes as well, with a snug supply-demand scenario offering additional support. Ergon, Calumet, Cross Oil and San Joaquin Refining all marked up pale oils by 20 cents between May 2 and May 9.

Whether producers chose the right time to pick their flowers was difficult to determine, as few changes in requirement levels emerged following the increase announcements. However, as the spring colors began to lose their luster, worries about lengthening supply and price direction may emerge.

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