Several price increase announcements emerged this week, infusing the market with renewed activity. The price hikes were said to be driven by hefty crude oil prices, escalating production and transportation costs, and relatively snug supply of a number of base oils.
Motiva led the way with a 10 cent-per-gallon increase on its API Group II STAR 4, 6 and 12 base oils, which became effective Jan. 5, sources said.
A few participants were quick to point out that Motivas movement allowed the producer to partially catch up with other producers price levels, as the company had not raised prices last October when most of the other suppliers had lifted postings. Motiva had not been able to revise prices because the company had declared force majeure on production, following an unexpected plant shutdown caused by Hurricane Harvey. The force majeure and ensuing allocation program were eventually lifted in November.
It was also heard that Motiva had sold its newly produced Group III oils to a number of customers over the last few weeks, and that prices for these products, which are not yet being posted on the Price Table below, were also adjusted up by 10 cents/gal.
Close on the heels of Motivas announcement, Chevron stepped out with a 12 cent/gal increase, which will become effective on Jan. 10. The producer explained that posted prices would be adjusted to reflect current supply/demand balances and overall market conditions.
Phillips 66 and Flint Hills Resources will also be adjusting Group II prices up and marketing all the base oils under the Excel Paralubes name.
Phillips 66s Pure Performance 70N and 80N base oils will be moving up 13 cents/gal; the companys PP110N grade will increase 16 cents/gal; its PP225N oil 13 cents/gal; and its PP600N cut 12 cents/gal.
Flint Hills 70 and 75-HC grades will increase 13 cents/gal; its 100-HC oil 16 cents/gal; its 230-HC grade 13 cents/gal and its 600-HC oil 12 cents/gal. The effective date for all of these increases will be Jan. 12.
There were also reports that ExxonMobil would be lifting the price of its Group I base oils by 15 cents/gal, with the exception of bright stock, which will remain unchanged. The producer will also raise its Group II and II+ cuts by 22 cents/gal, all with an effective date of Jan. 26. These adjustments will not be reflected in the Price Table below until the Jan. 24 edition of Lube Report.
Also in the Group II+ segment, Kleen Performance Products will be increasing its postings 12 cents/gal on Jan. 15.
On the naphthenics front, the recent climb in crude oil prices, increase in transportation costs, squeezed margins, and fairly balanced demand/supply conditions prompted suppliers to seek price hikes as well.
Calumet was the first producer to communicate a 20 cent/gal increase across the board, with an effective date of Jan. 17.
San Joaquin Refinings naphthenic oils will also be raised by 20 cents/gal on the same date as Calumet.
Ergon also announced that it would be marking up its naphthenic products by 20 cents/gal on Jan. 12. The increase will apply to all viscosities, the company said in a press release.
Similarly, Cross Oils customers will see a 20 cent/gal increase for all products, but with an implementation date of Jan. 18.
In base oil production, HollyFrontier is preparing for a turnaround at its Group I plant in Tulsa, Oklahoma, scheduled for the second half of February. The plant can produce 9,500 barrels per day of base oils. The producer expects to be able to cover requirements during the 40 to 45-day shutdown as it is building inventories.
Upstream, crude oil futures hit three-year highs on Tuesday, buoyed by OPEC-led production cuts and expectations that U.S. crude inventories had sharply fallen for an eighth week.
Observers were also waiting to see whether President Donald Trump would change the U.S. sanctions on Iran, which have been implemented according to the 2015 international agreement to curb the countrys nuclear program. Reinstating economic sanctions could limit Irans oil exports.
At the same time, the higher crude prices could encourage increased U.S. oil production – which is expected to climb to more than 10 million barrels per day in early 2018 – and this could start exerting downward pressure on crude pricing.
On Tuesday, Jan. 9, West Texas Intermediate futures closed on the CME/Nymex at $62.96 per barrel, up $2.59 per barrel from $60.37/bbl on Jan. 2.
Light Louisiana Sweet wholesale spot prices settled at $66.43 per barrel on Jan. 8, compared to $65.51 on Dec. 29, according to the U.S. Energy Information Administration.
Brent was trading at $68.82/bbl on the CME on Jan. 9, up $2.25/bbl from $66.57/bbl on Jan. 2.
Low sulfur vacuum gas oil was at Feb WTI plus $15/bbl ($77.01/bbl) and high sulfur VGO was at crude plus $13.25/bbl ($75.26/bbl) on Jan. 4. In comparison, low sulfur VGO was hovering at $75.67/bbl and high sulfur VGO at $73.92/bbl on Dec. 30, according to data published by PetroChemWire.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.