By Tim Sullivan
 
Crude oil prices may be on the rise again but U.S. base oil suppliers see no reason to expect their prices to follow anytime soon.
 
The U.S. base oil market has undergone four rounds of price cuts since mid-October, spurred by falling crude prices and shrinking demand. Crude prices bottomed out and hovered in the range of $18-$19 per barrel in January and for most of February.
 
Those prices have jumped approximately $4 in recent days, based on expectations that OPEC and other major oil exporters will extend production cutbacks. Crude rose 72 cents on the New York Mercantile Exchange Tuesday to close at $23.17 per barrel.
 
In addition, the lubricants industry is approaching the normal end of its winter lull. Production typically ramps up in late March or early April as blenders prepare for the spring and summer driving seasons.
 
Still, principal U.S. base oil suppliers said this week that base oil price increases do not seem imminent.
 
“Orders may be picking up but it’s hard to tell at this point whether demand is coming back or if it’s just that inventories were reduced so much,” one marketer said. “Suppliers don’t like to move their prices back and forth so there’s probably not going to be [price] movement until there’s time for a consistent trend to develop.”
 
Other marketers said U.S. base oil prices are currently affected as much by European base oil prices as by costs of crude.
 
“Certainly the price of crude sets a floor,” one said. “But the arbitrage between the U.S. and Europe is still pretty high, although it’s come down somewhat. Arbitrage is like gravity; unless that pressure is relieved – for example, by production cuts in Europe – it’s going to continue to hold down U.S. prices, or even cause further cuts.”

 Posted Prices (US$ per gallon)