Base Oil Pricing Report

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At a recent conference in Singapore, most speaker presentations focused on the state of the base oil and lubricant industry and the many disruptors that producers and consumers have been dealing with in recent months.

From volatile crude oil and raw material prices to geopolitical tensions, changes in government regulations, innovations in electric vehicle designs and the upcoming International Maritime Organization 2020 rules-to name a few factors-it is clear that players that are not prepared to face these challenges might be left behind.

In the tumultuous environment that businesses have to operate in nowadays, the most valuable attribute appears to be the ability to adapt to constant changes.

A number of experts mentioned growing global base oil production, particularly in light of new plants coming on stream in China, and the need for producers to find fresh outlets for their products. This might be easier said than done. Most markets appear well-supplied and have secured reliable sources of product, so finding other ways to cope with the output increase is crucial.

The implementation of the IMOs low-sulfur marine fuel regulations on January 1, 2020, is also expected to cause a change in fuel supply patterns and lead to higher transportation costs, although uncertainties about the direct and indirect consequences abound.

Meanwhile, closer to home, Chevron surprised U.S. base oil market players with a price increase during the Fourth of July holiday week. The producer raised its API Group II base oil prices by 20 cents per gallon.

The increases were thought to be driven by steeper crude oil and feedstock prices over previous weeks, coupled with a tightening of Group I and II availability within the domestic supply system. The snug supply conditions were the result of unplanned production outages and healthy demand in June.

While no other producers had come forward with similar initiatives at the time of writing, participants kept monitoring crude oil prices as West Texas Intermediate futures embarked on an upward trek, climbing from around $53 per barrel in early June to above $57 per barrel in early July. Adapting quickly to feedstock price changes remains a key mission for those who want to run a successful business.

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