The fairly frantic succession of price changes observed in the U.S. base oil market over the last few weeks appears to have subsided, with price decrease communications emerging only from San Joaquin Refining and Cross Oil this week.
Both San Joaquin and Cross Oil lowered their naphthenic base oil prices by 15 cents per gallon on Oct. 28, sources said. This amount matches Calumets price revision, which was communicated to customers last week and had the same effective date, and with Ergons, who had also reduced prices by 15 cents/gal on Oct. 20.
The recent price adjustments, both on the naphthenic as well as on the paraffinic side of the business, came on the back of sliding crude oil and feedstock vacuum gas oil values amid declining demand.
This last factor is typical for this time of the year, and a desire to lower inventories right before year-end may result in further adjustments down the road, although no firm discussions about this possibility have been entertained, sources commented.
The current market conditions gave rise to price adjustments on the paraffinic side of the business in the first half of the month, with API Group I, II, II+ and III suppliers completing a round of decreases ranging 10 cents/gal to 47 cents/gal on Oct. 13.
Competitive actions had started on the spot front a few weeks earlier, possibly leading the way to the posted price adjustments, sources said.
Suppliers have also resorted to cutting export prices to entice buyers, but requirements have weakened in most regions, causing local prices to come down as well.
In Mexico, domestic producer Petroleos Mexicanos (Pemex) was heard to have lowered its prices, following reductions in U.S. base oil prices, while buying interest from Mexican buyers for U.S. imports has slowed down as well, sources said.
In related news, Pemex reported that the company had signed a cooperation agreement with U.S. Chevron Corp. to explore industry opportunities that would be beneficial to both parties, the state-owned Mexican refiner posted on its website on Oct. 26.
The memorandum of understanding, which was signed in Mexico City, recognizes the long relationship between the two companies, Pemex said.
The refiners plan to collaborate on deep-water exploration, production of heavy crude oil, the revitalization of mature fields, the development of natural gas projects, and refining and fuel distribution, Pemex explained.
In base oil production, it was heard that LyondellBasell is preparing to restart its Houston, Texas, 3,600 barrels per day naphthenic base oil plant around Oct. 31, following a month-long routine maintenance program. The turnaround did not seem to have a significant impact on the market, as the supplier had built inventories ahead of the shutdown, sources said.
Calumet plans to conduct a routine turnaround at its Princeton, La., unit in January. The plant can produce 6,900 barrels per day of naphthenic oils.
Upstream, West Texas Intermediate crude futures continued to flirt with the $80/barrel mark on expectations that an Energy Information Administration (EIA) report due on Wednesday would show that U.S. stockpiles have mounted.
WTI settled on the CME/Nymex at $81.42 per barrel on Oct. 28, down by $1.39/bbl from a settlement at $82.81/bbl on Oct. 21.
Brent crude was trading around $86.03 per barrel on the CME on Oct. 28, up $0.63/bbl from $85.40/bbl a week ago.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.