04 June 2008 18:53 [Source: ICIS news]
HOUSTON (ICIS news)--Extreme market circumstances prompted US Group II paraffinic base oils producer Chevron to step out with two hikes for posted prices just days apart, buyers said on Wednesday.
“Chevron is the only company to have ever adjusted postings twice within one week in the 20 years I’ve been involved with base oils,” a buyer said.
The first increase, effective on 30 May, lifted the light oil by 38 cents/gal (€.07/litre), mid by 30 cents/gal, and the highest grade by 35 cents/gal. These hikes were made to catch up with previously announced hikes by other sellers from 22 May, a buyer said.
In addition, Chevron told its buyers on Tuesday it would also push up all grades by 25-30 cents/gal effective on 6 June.
Chevron’s announcements added 68 cents/gal to its 100/120 grade oil, bringing the posted price to $4.33/gal, according to global chemical market intelligence service ICIS pricing.
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Independent lubricant blenders are increasingly worried over the relentless surge in prices. The biggest challenge is in passing on the hikes to the finished market quickly enough, a buyer said.
“ExxonMobil has raised its posted prices more than seven times already this year, but finished lubricants prices have only increased a couple of times this year,” the buyer added.
Producers said high feedstock vacuum gas oil (VGO) values were the driving force behind the hikes.
Low sulphur vacuum gas oil VGO traded for $3.20/gal on Tuesday, while high sulphur VGO was trading for $3.13/gal. The costs were more than $1/gal over last year’s prices, a trader said.
VGO is used as a feedstock for integrated refiners to enhance production of transportation fuels such as gasoline, jet fuel and diesel. When profits are better, refiners will maximise fuel production and minimise base oil production.
Meanwhile, the spot price for 100 viscosity base oil was around $3.80/gal during the last week of May, according to buyers and sellers.
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