As summer drew to a close following the Labor Day weekend, U.S. base oil sources admit that the recent quiet spell has been welcomed.
The month of August afforded most producers the opportunity to rebuild depleted inventories, drained in the preceding several months. Despite these efforts, there are still shortages of a number of neutrals as well as bright stock. Holly remains on 50 percent sales control for bright stock, while other producers also report having no surplus.
However, with activity fairly thin over the past several weeks, many suppliers have been able to bring overall inventories back to a more balanced status.
There are still some concerns, and a number of large refiners continue to keep a watchful eye on stock positions. When possible, producers have beefed up base oil inventories heading into the more active hurricane season in the event of production issues.
Many paraffinic suppliers agree that customer orders are at expected levels for the remainder of the month, although in a few cases, demand is above prescheduled volumes.
In a rare occurrence – at least for the last four to six months – one producer was able to put together two export cargoes of heavy vis neutrals totaling about 5,000 tons. One ship recently loaded, and the second will follow in early October. The spot price was heard to be $1,055 to $1,065 per ton FOB, or largely equivalent to a Gulf Coast heavy neutral posting after a typical contract-customer volume discount.
Naphthenic producers lament that stocks are extremely low due to very robust demand for months. The severe tightness of mid and heavy pale oils has left virtually no opportunities to entertain new spot business, they add. Availability of light vis naphthenics (40-60) are better balanced, but an uptick in demand for these grades has been seen in recent weeks.
Several sources confirmed that an average price range of $2.90 to $3.60 per gallon is indicative of current standard naphthenic base oils business, not including specialty segments. Other business is concluded both below and above this range, depending on end use, sources reiterated.
Subsequent to a full round of 15 cent per gallon price hikes for all pale oils implemented in early August by all producers, Cross Oil pushed up all accounts by 6 percent on certain pale oils. Higher prices were effective Sept. 1, and were a response to the pressing supply/demand situation, the company said.
At the close of the Tuesday, Sept. 7, NYMEX session, front-month light sweet crude futures ended the day at $74.09 per barrel, gaining $2.17 over the Aug. 31 close at $71.92/bbl.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.