02 August 2010 23:29 [Source: ICIS news]
HOUSTON (ICIS)--ExxonMobil is chopping its US paraffinic base oil prices by up to 6%, its first decrease in seventeen months, sources said on Monday.
In a letter to its buyers, ExxonMobil said it would issue reductions ranging from 15-23 cents/gal for Group I and II+ base oils, effective on 30 July.
Its new posted price for bright stock, the most difficult grade to find according to buyers, will drop by 15 cents to $4.02/gal ($1,186/tonne or €913/tonne).
It was unclear if other major Group I sellers including Valero, Calumet and Holly would follow the price decrease.
The last time ExxonMobil decreased base oil prices was in March 2009, when the effects of the recession were hitting the automotive markets with a vengeance.
Buyers had mixed reactions to the news as many learned of the decrease on the same day that West Texas Intermediate (WTI) crude oil prices crossed $80/bbl.
“Supply has been tight and Exxon has not offered any spot, so the decrease is surprising but understood at a time when demand is beginning to drop,” a buyer said.
US paraffinic base oils demand typically drops off during the summer vacation season, July and August, but picks up again in September.
Another buyer speculated that the price decrease could be connected to the end of an agreement that ExxonMobil made with the Federal Trade Commission (FTC) over 10 years ago.
That deal obligated ExxonMobil to enter long-term contracts to sell base oils to the merchant market, a buyer said.
Still, other players said the price decrease has to do with keeping the differential between Group I and Group II prices, especially as Group II base oil supply has recently improved.
ExxonMobil’s last price move was on 11 June, when it increased prices by 15-20 cents/gal. At that time, all Group I sellers moved prices up, but Group II prices stayed flat.
($1 = €0.77)
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