By Tim Sullivan
 
As crude oil prices continued climbing back toward last year’s peak, the U.S. base oil market appeared poised for price increases that some called inevitable.
 
The price of crude on the New York Stock Exchange rose 83 cents Tuesday to close at $27.71 per barrel. That represents an increase of nearly 33 percent since mid-February, when U.S. base oil suppliers implemented the latest in a series of price cuts. It is also the highest level in more than six months.
 
“I would think that a [base oil] price increase is inevitable and imminent,” said one supplier. “Sometimes base oil prices are driven more by supply and demand than by the price of crude. But crude has risen so much now, I think it’s gotten to an overwhelming stage.”
 
Crude prices have risen gradually since January as members of the Organization of Petroleum Exporting Countries and other oil producers reduced supply. Prices jumped further the past few days as Iran and Iraq expressed support for an oil embargo against the United States in response to Israel’s invasion of Palestinian areas.
 
The rise in crude has cut into base oil refining margins, but principal U.S. suppliers are still waiting on ExxonMobil to trigger a price hike. The oil giant usually leads price changes because of its dominance in the U.S. merchant base oil market.
 
Base oil procurers agreed that prices will almost certainly rise soon.
 
“I would say it has to happen within the next two weeks,” one purchaser said. “We’d rather not see it happen, but crude has gone up so much and demand usually increases this time of year. Realistically, we have to expect a price increase. And I think this increase will be larger than the decrease we saw in February.”

 Paraffinic Base Oil Posted Prices (US$ per gallon)