13 April 2010 17:29 [Source: ICIS news]
HOUSTON (ICIS news)--US Group II base oil producer Flint Hills Resources (FHR) is raising its base oil prices for the third time this year as crude costs and low operating rates weigh on margins, sources said on Tuesday.
In a letter to its customers, FHR said it would raise all grades of base oils by 20 cents/gal, effective 13 April.
FHR’s 100 viscosity oil was posted at $3.00/gal ($939/tonne, €695/tonne) free on board (FOB) US Gulf coast (USG) prior to the hike, according to data from global chemical market intelligence service ICIS pricing.
A trader said the Group II base oils have become tighter than anyone could have predicted.
“There were several turnarounds during first quarter when demand was poor,” the trader said. “Demand has since improved and production is strong, but the refiners are not making enough vacuum gas oil (VGO) feedstock for base oil production to meet current demand levels.”
Demand has increased during the second quarter as lubricant blenders prepare for the busy spring blending season, a seller said.
“Winter is typically the slowest season of the year for lubricant blending, but spring (second quarter) is usually the busiest, as engine oil sellers run promotions and ramp up production for the spring and summer peak driving seasons,” a buyer said.
It was unclear if other Group II sellers ConocoPhillips, Chevron, Motiva and Calumet would follow with an April hike.
($1 = €0.74)
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