US Group I and II base oil prices meeting parity

17 October 2012 02:37  [Source: ICIS news]

SCOTTSDALE (ICIS)--Price points between Group I base oils and Group II, lolling in ample supply, are meeting near the middle in the US, buyers and sellers said on Tuesday.

 Typically Group II base oils are sold at a premium to Group I base oils, but the recent round of Group I posted price increases has narrowed the differentials to Group II, shifting buyers’ options in blending considerations.

Blenders are able to work between certain Group I grades, such as SN150, and some mid-viscosity grades, and Group II grades, to tweak formulations toward required finishes, with price differentials being an ongoing salient factor, a supplier said on the sidelines of the Independent Lubricant Manufacturers Association (ILMA) annual meeting.

Group I SN150 was last assessed by ICIS at $3.50-3.65/gal (€2.70-2.81/gal) FOB (free on board) US Gulf, while light viscosity Group II grades were also trading at $3.65/gal FOB US Gulf in some cases.

Despite the outage at Chevron’s Richmond, California, refinery and reduced imports, long supply in the Group II tier is still evident in the US, a buyer said.

The impact from Chevron’s outage has remained minimal, keeping Group II Asian import opportunities largely sidelined and European Group I options into Mexico also curtailed as Mexican buyers look at competitively priced Group II product in the US.

Another emergent element is coming in from the re-refining segment. Certain types of Group II re-refined base stock are meeting full specification available for blending use and selling at higher volumes than ever before.

US domestic base oil demand remains standard-to-softening, with the effects of year-end actions being felt somewhat earlier than is typical, according to several sources at the ILMA event.

“The Chevron outage in Richmond, California has actually helped to keep the market steady during a time of weak demand,” a supplier said.

“I think we are all concerned of the potential Group II supply tsunami that could come when all plants are operating and new capacity comes online in the US Gulf next year.”

The meeting ends on Wednesday, October 17.

Additional reporting by Judith Taylor

($1 = €0.77)

By: Heather McGuire Doyle
+1 713 525 2653

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