ILMA Compoundings December 2016 - 15

THE ICIS VIEW

Q4 Base Oil Posted
Prices Steadier
Judith Taylor

F

ourth-quarter base oil posted prices have been steadier
than earlier in 2016 and certainly have seen more stability
than in the fourth quarter of 2015. Less volatility in the
upstream crude oil markets has been the underlying platform for
steadier base oil posted prices.
Posted prices set a top mark on the price spectrum while
contract and market pricing have seen wide discounting. This
has also taken place during the fourth quarter, driven partly by
the typical seasonal slowdown in demand and partially by a few
pockets of supply length.
Supply length has been slow to develop in the fourth quarter,
but light grades in Group I and Group II tend to experience this
more frequently than the heavy grades. One reason for this is
that light and mid-viscosity base oils in Group I and Group II are
often priced at or near parity in the competitive market of 2016.
Where fourth-quarter 2015 was peppered with posted price
decreases - pulling the market prices down alongside the
posted fall - fourth-quarter 2016 has been notably stable.
One August increase to posted prices was made by Chevron,
but it did not collect a following with other Group II producers,
leaving most posted prices unchanged to the end of the third
quarter. Posted prices then stayed broadly stabilized until
October, when Motiva dropped prices on all its posted grades.
However, Phillips 66 raised posted prices on only its heavy 600
grade, and benchmark West Texas Intermediate (WTI) crude oil
maintained pricing in the high $40s/barrel, bumping into the
low $50s/barrel for several weeks in October.

The steadier crude oil prices plus the up/down posted moves
caused most producers to continue to gauge the situation. This
forestalled other posted price moves and left base oil posted
prices unchanged going into November.
With the dominance of Group II and increasing use of Group
III, crude oil prices are becoming less the immediate indicator
on base oils, according to some sources. Vacuum gas oil (VGO)
prices are said to be taking a greater role in the pricing view.
However, most base oil market participants today continue to
capture the view on crude oil as the leading indicator and factor
in the VGO prices as needed.
Going into November, base oil prices remain fairly stabilized.
While each week many market participants expect a price
change, the steadiness of the upstream crude oil price
continues to hold back changes and maintain more stability in
the base oil side.
Additionally, discussions about turnarounds have been heard,
and the Group II heavy 600 grade supply remains snug.

Less Upstream Volatility
These factors are keeping fourth-quarter 2016 much quieter
than the previous year and are maintaining a sort of step-bystep stability in the quarter.
The following graph shows the WTI price trend from October
2015 to October 2016, followed by a second graph showing a
sample of base oil posted prices for the same period.

Compoundings December 2016 * 15 * Vol. 66 No. 12



ILMA Compoundings December 2016

Table of Contents for the Digital Edition of ILMA Compoundings December 2016

ILMA Compoundings December 2016 - 1
ILMA Compoundings December 2016 - 2
ILMA Compoundings December 2016 - 3
ILMA Compoundings December 2016 - 4
ILMA Compoundings December 2016 - 5
ILMA Compoundings December 2016 - 6
ILMA Compoundings December 2016 - 7
ILMA Compoundings December 2016 - 8
ILMA Compoundings December 2016 - 9
ILMA Compoundings December 2016 - 10
ILMA Compoundings December 2016 - 11
ILMA Compoundings December 2016 - 12
ILMA Compoundings December 2016 - 13
ILMA Compoundings December 2016 - 14
ILMA Compoundings December 2016 - 15
ILMA Compoundings December 2016 - 16
ILMA Compoundings December 2016 - 17
ILMA Compoundings December 2016 - 18
ILMA Compoundings December 2016 - 19
ILMA Compoundings December 2016 - 20
ILMA Compoundings December 2016 - 21
ILMA Compoundings December 2016 - 22
ILMA Compoundings December 2016 - 23
ILMA Compoundings December 2016 - 24
ILMA Compoundings December 2016 - 25
ILMA Compoundings December 2016 - 26
ILMA Compoundings December 2016 - 27
ILMA Compoundings December 2016 - 28
ILMA Compoundings December 2016 - 29
ILMA Compoundings December 2016 - 30
ILMA Compoundings December 2016 - 31
ILMA Compoundings December 2016 - 32
ILMA Compoundings December 2016 - 33
ILMA Compoundings December 2016 - 34
ILMA Compoundings December 2016 - 35
ILMA Compoundings December 2016 - 36
ILMA Compoundings December 2016 - 37
ILMA Compoundings December 2016 - 38
ILMA Compoundings December 2016 - 39
ILMA Compoundings December 2016 - 40
ILMA Compoundings December 2016 - 41
ILMA Compoundings December 2016 - 42
ILMA Compoundings December 2016 - 43
ILMA Compoundings December 2016 - 44
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