Summer is a time when demand for base oils eases and inventories climb, and producers typically try to hold on to posted prices for as long as possible despite the downward pressure brought about by a general slowdown in market activity.
This year, the quiet summer spell of steady postings ended when Motiva communicated a price reduction the first week of August, followed closely by a couple of other suppliers. On the naphthenics front, Cross Oil announced an increase.
This was one of those rare occasions when price adjustments in the paraffinic and naphthenic camps moved in opposite directions.
Motivas price reduction was heard to have been prompted by seasonally soft demand and competitive spot pricing. The producer reduced the posted price of its API Group II oils by 15 to 20 cents per gallon, while its Group III grades were lowered by 20 cents.
Shortly after Motivas overture, Chevron, Excel Paralubes and ExxonMobil also lowered their posted prices by 6 to 20 cents per gallon, depending on the grade and the producer, all effective before the end of August.
Even after these announcements, other suppliers still hesitated to revise prices, given squeezed margins on the back of steep feedstock values and increases in transportation costs.
These same cost factors were the main drivers for the increase that Cross Oil imposed on all of its naphthenic oils in mid-August. The companys light grades through its 750 Saybolt universal seconds cuts increased by 20 cents per gallon, and all grades above 750 SUS by 15 cents.
A couple of other naphthenic producers had also moved prices in the weeks leading up to these adjustments but did not make any official announcements.
While crude oil and feedstock prices remained volatile and unpredictable and values largely hinged on geopolitical maneuvers-with a surprise lurking around every corner-there was one element that most participants could count on: growing supply against lackluster demand.
Aside from trying to stimulate sales through lower pricing, sometimes manufacturers also reduce operating rates to manage inventories. It remained to be seen which of these strategies base oil producers were likely to apply to achieve a more balanced supply-demand scenario as the fall creeps in.