The first full week of 2009 was a bit disconcerting to participants in the U.S. base oil market. Demand remained thin alongside ample supply and still-high prices, according to some buyers. Crude oil values heading upward, gaining about $10 per barrel in a weeks time, gave added concern to market players.
Nynas said it will cut the price of its naphthenic oils by 50 cents per gallon on Monday, Jan. 12. This action followed other naphthenic producers who had issued downward adjustments of 30 to 50 cents per gallon in recent weeks. Sources say pale oils are now selling in the range of $1.85 to $2.95 per gallon, depending on grade and end use.
Both paraffinic and naphthenic suppliers acknowledged that overall sales were still thin for most base stocks. They said that many segments of the market had endured a drastic slowdown in the wake of the dismal economy, becoming most apparent in the last three to four months. Whether demand will pick up in mid-to-late February ahead of the spring buying season is uncertain.
Sources said that spot trade in December was negligible despite sellers offering steeply discounted prices in efforts to move material out of top-heavy tanks. It was believed that a number of sellers were still being aggressive in their mission to stir up some fresh trade and were prepared to stick with Decembers pricing to potential buyers.
Low-ball prices were particularly linked to light and some mid vis neutral grades, sources indicated. Outright prices on the table were not readily available, but were suggested to be $1 per gallon or more below current postings.
Most grades were abundant, consumers said, with the exception of heavy neutrals and bright stock, which were in better balance. Going forward, the market could tighten across the board as Motiva prepares to enter its 45-day scheduled turnaround later in the month. A restart on March 1 is slated for the 40,300 barrel per day Port Arthur, Texas, facility. Many refiners were reportedly operating their plants at reduced rates to help alleviate the markets over-supply situation.
Meanwhile, crude values have made a come back, shooting up to the $50/bbl mark on Tuesday. Forward months trade placed crude prices near the $60/bbl level for July. According to some reports, oil prices have risen nearly 40 percent since the latter part of December on the back of the Middle East conflict, contract disputes in Eastern Europe and a planned cut from OPEC, which also sparked concern about supply disruptions. (Members of the Organization of Petroleum Exporting Countries were reported to be complying with the group’s largest planned production cut in history.)
At the close of the Tuesday, Jan. 6, NYMEX session, light sweet crude values ended at $48.58 per barrel, a gain of $9.55 from the week-earlier settlement at $39.03/bbl. During intra-day trade, crude reached a high of $50.47/bbl.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.