US base oil prices moving up 5% on tight supply

14 June 2010 18:32  [Source: ICIS news]

HOUSTON (ICIS news)--US base oil prices are moving up by 5% following hikes by majors ExxonMobil, Holly and PDVSA, as supply in the Americas remains severely limited, sources said on Monday.

Latin America’s major base oil producer PDVSA raised the price of its paraffinic base oils on Monday.

PDVSA said it increased its paraffinic base oils prices by 14-22 cents/gal ($42-66/tonne, €35-55/tonne).

The company’s price for brightstock moved up to $4.34/gal free on board (FOB) Venezuela.

The refiner’s previous increase on paraffinic base oils was on 17 May.

Holly’s paraffinic base oil prices would also be moving up by 15-20 cents/gal on Monday, according to sources.

The moves followed increases announced by ExxonMobil last week.

Base oil supply in the Americas had been painfully tight since the end of first quarter, a trader said.

“Contract buyers are struggling to get even their forecasted volumes met, and spot buyers are just completely out of luck right now,” the trader said.

Weak demand for fuel products earlier this year pushed refineries to operate at reduced levels, leaving base oil inventories low.

“Base oils are generally only 1% of global refined product volumes. Refinery decisions are made based on the 99% fuels volumes, so too often base oils are collateral damage,” a buyer said. “Fuels refining is the big dog, but base oils are just the tail of the dog.”

Just as market demand improved, the base oil sector became saturated in outages and allocations.

A large-volume base oils buyer said that it is the tightest supply situation seen in over four years, surpassing even a difficult shortage of base oils following the hurricanes in 2008.

($1 = €0.83)

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