ExxonMobil price moves puzzles lube market - buyers

09 June 2009 23:52  [Source: ICIS news]

By Heather Doyle

HOUSTON (ICIS news)--US base oil producer ExxonMobil told its consumers on Tuesday it would increase prices one grade of lubes but decrease others, a move that puzzled some buyers.

“It’s really a strange situation,” a buyer said. “With feedstock vacuum gas oil (VGO) and crude prices moving up, we expected a price hike, but the decreases are very odd. I don’t know what to make of it.”

ExxonMobil said it would raise its Group I 100-grade base oil price by 40 cents/gal effective on Tuesday. But that it would decrease the price of its 275 and its bright stock grades by 10 cents/gal and 30 cents/gal, respectively.

Buyers said they were not surprised by the increase to the 100 grade because feedstock values have recently surpassed posted prices.

The ExxonMobil posted price for 100-grade oil was $1.65/gal ($502/tonne, €361/tonne) before the hike, according to global chemical market intelligence service ICIS pricing.

But soaring crude oil prices had pushed feedstock low-sulphur vacuum gas oil (VGO) to $1.75/gal and higher, at least 10 cents over posted prices.

ExxonMobil’s last price change was on 25 March, when it lowered prices by 40-85 cents/gal.

Its move on Tuesday followed hikes by other sellers including Calumet, Flint Hills Resources (FHR), ConocoPhillips and Chevron.

A supplier said the decreases were likely ExxonMobil’s attempt to make the posted prices more reflective of actual market activity.

Posted prices are generally discounted for contract customers and on the spot market, according to buyers and sellers.

Bright stock spot prices have been around $2.75/gal FOB (free on board) US, according to ICIS pricing, while ExxonMobil’s posted bright stock price was $3.22/gal.

The 30-cent decrease puts ExxonMobil’s bright stock posted price closer to recent spot activity at $2.92/gal, a trader said.

Other market players pointed out that ExxonMobil’s 275 grade was competitive with Holly’s 200 blend and that the two refiners have always competed on the bright stock sales.

Holly recently purchased Sunoco’s Tulsa refinery in Oklahoma, which included its 9,500 bbl/day base oil plant.

“I am bewildered by [ExxonMobil’s] move, but I really think it’s an attempt to grab market share just in time for the new owners to take charge,” a market player said.

“Back in March when all the news of this sale came out, ExxonMobil lowered its bright stock  by 85 cents/gal,” a buyer said. “Now that the sale is final, ExxonMobil is lowering its bright stock again when all other sellers are moving prices up. I think ExxonMobil is reaching for market share and telling Holly to go away.”

ExxonMobil, as a policy, does not comment on price moves.

Holly had not announced any price changes as of Tuesday afternoon.

($1 = €0.72)

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By: Heather McGuire Doyle
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