Flint Hills may post sole US base oil price drop

13 October 2008 15:35  [Source: ICIS news]

SCOTTSDALE, Arizona (ICIS news)--No base oils seller wanted to follow the recent Flint Hills Resources (FHR) price decrease in a market where supply remains tight, US buyers said on Monday.

FHR dropped last week its posted prices for US paraffinic base oils - the first price change in three months and the first decrease in over a year.

However, price moves have yet to be announced by other suppliers, such as ExxonMobil, Sunoco, Valero, Calumet Specialty Products, ConocoPhillips, Chevron, Motiva and SK E&P.

“We were actually surprised by the (FHR) drop since supply remains tight,” a trader said.  “The US lost at least three weeks of production following hurricanes Gustav and Ike."

FHR has been on allocation with its customers since Hurricane Ike struck the US Gulf coast on 13 September.

The largest base oil seller in the US, Motiva, has delayed its planned 45-day turnaround to begin at the end of January due to hurricane interruptions, buyers said. The 45,000 bbl/day base oils supplier remains on allocation, buyers added.

“FHR has lowered its prices, but there is no material available to sell,” the trader said. “And due to tight supply, we don’t expect any other decreases announced in the near term either.”

Flint Hills Resource's price drop follows several weeks of increases.

Base oil sellers were notifying customers of price increases about every two weeks from February to July, spurred by the run-up in crude and vacuum gas oil (VGO).

The price of feedstock crude oil skyrocketed to a high of $147.27/bbl in July, elevating the posted price for ExxonMobil’s Group I, 250-grade base oil by 68% from one year ago to $5.19/gal, according to data from global chemical market intelligence service ICIS pricing.

However, since the price hikes, crude oil prices have since taken a dramatic nosedive. For the most part, base oil prices remain at the same levels from July, a buyer said.

“Lower crude values and strong demand have now given base oil producers the widest margins in history,” the buyer said. “We are pushing all of our suppliers to lower prices.”

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By: Heather McGuire Doyle
+1 713 525 2653

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