By Tim Sullivan
Concerns about a shortage in the United States of Group II-plus have abated in recent weeks, although demand continues to be strong.
Buyers and sellers agree that the changed outlook is due to two delays – one in the schedule for the next passenger car motor oil upgrade, the second for a maintenance turnaround at ExxonMobil’s Baytown, Texas, refinery.
Purchasers in the market say their hopes are further buoyed by expectations that Baytown’s capacity will increase after the turnaround.
Everyone agrees that the Group II-plus business has improved significantly during the past year. North America has four refiners in the category – ExxonMobil, Petro-Canada, Motiva and ChevronTexaco. Some say that Lithcon, which imports Group III stocks produced by Korean refiner SK Corp., can be viewed as competing in the same market because its prices are significantly lower than those of other Group III producers.
“What’s happened is that GF-3 requires larger amounts of Group II-plus and Group III,” said one marketer, referring to the most recent passenger car motor oil upgrade, which went into effect a year ago. “On top of that, the motor oil business has learned to incorporate them into synthetic products. I’d bet that all producers of Group II-plus are running pretty much flat out today.”
Demand received a further boost earlier this year in anticipation of the next passenger car motor oil upgrade, GF-4, which was scheduled to hit the market by the fall of 2003. Observers expect it to require even larger amounts of premium stocks.
According to sources, the Group II-plus market tightened so much that ExxonMobil was prepared to cut off allocation in order to achieve inventory levels needed to meet contracts through the November turnaround at Baytown.
Delays have eased the situation. First U.S. and Japanese automakers agreed to put off implementation of GF-4 for one year. Then ExxonMobil decided to delay the shut down at Baytown until February.
“For now, demand is being met,” one purchaser said. “We expect demand for Group II-plus to continue to increase but it doesn’t look like there will be any supply issues for awhile.”
Several sources said they expect ExxonMobil to expand capacity of the Baytown refinery during the turnaround, although the size of such an expansion is unclear. Some described it as “capacity creep,” while others said they expect a more significant increase. ExxonMobil officials could not be reached for comment.
Paraffinic Base Oil Posted Prices (U.S. $ per gallon)
| |
Conoco |
Valero |
Sunoco |
Motiva |
ExxonMobil* |
Citgo |
Chevron
Texaco* |
Lithcon |
| Viscosity |
Gulf Coast |
East Coast |
Midwest |
Gulf Coast |
Gulf Coast |
East Coast |
Gulf Coast |
West Coast |
Gulf Coast |
|
GROUP I |
|
|
| 70-75 |
|
|
1.29 |
|
1.24 |
1.35 |
|
|
|
| 85 |
|
|
|
|
|
|
1.20 |
|
|
| 100 |
|
1.30 |
|
|
1.20 |
1.31 |
1.20 |
|
|
| 148-165 |
|
1.24 |
1.29 |
|
1.20 |
1.31 |
1.26 |
|
|
| 200-250 |
|
|
1.32 |
|
1.22 |
1.33 |
|
|
|
| 300-350 |
|
|
1.33 |
|
1.22 |
1.33 |
1.24 |
|
|
| 500-525 |
|
1.35 |
1.43 |
|
|
|
|
|
|
| 600-700 |
|
1.37 |
|
|
1.32 |
1.43 |
1.36 |
|
|
| Bright Stock 150 |
|
1.54 |
1.57 |
|
1.50 |
1.61 |
1.60 |
|
|
| GROUP II |
|
|
| 70 |
1.39 |
|
|
1.39 |
|
|
|
|
|
| 100-110 |
1.31 |
|
|
1.31 |
|
|
|
1.41 |
|
| 145-150 |
|
1.39 |
|
1.29 |
|
|
|
|
|
| 220-225 |
1.33 |
|
|
|
|
|
|
1.43 |
|
| 305 |
|
|
|
1.31 |
|
|
|
|
|
| 600 |
1.41 |
|
|
1.39 |
|
|
|
1.51 |
|
| GROUP II+ |
|
|
| 110-130 |
|
|
|
1.66 |
1.56 |
1.67 |
|
|
|
| 190 |
|
|
|
|
1.44 |
1.55 |
|
|
|
| GROUP III |
|
|
| 100 |
|
|
|
|
|
|
|
|
2.25 |
| 150 |
|
|
|
|
|
|
|
|
2.27 |
* ExxonMobil and ChevronTexaco prices obtained indirectly.
