The U.S. base oil market is gearing up for increased activity as the spring season approaches, but participants said that signs of a pick-up are taking longer to materialize than in previous years.
A number of market players characterized the market as flat, with postings remaining unchanged, following the recent flurry of price decreases for paraffinic and naphthenic oils.
Suppliers did not expect orders to improve substantially until the end of February because buyers are concerned about downstream demand and prefer to delay orders as long as possible, given the possibility that further price decreases could emerge.
There appears to be some buying interest for API Group I grades from Mexico, and it was heard that an inquiry for a mixed parcel had surfaced in Colombia.
There has also been talk about possible arbitrage opportunities for U.S. Group I products to move to Europe, but suppliers said that traders had shown little interest in shipping cargoes, despite adequate availability. There was also some speculation that deals had been concluded quietly at levels below those being published.
In production, rumors circulated that Paulsboro Refining had suffered production problems at its base oils unit, but the producer’s 11,000 barrels per day Group I unit in Paulsboro, N.J., was heard to be running at full rates. However, the company’s Delaware City, Del., refinery – which does not produce base oils – was shut down briefly during a snowstorm a couple of weeks ago.
There were also reports that Excel Paralubes 22,200 barrels per day Group II base oil plant in Westlake, La., would be undergoing maintenance in the first quarter, but this could not be confirmed.
It was heard that Cross Smackover, Ark., base oils plant, which has been off-line since early January due to a fire at the refinerys hydrotreater and cooling process equipment, is not likely to be back on stream until the end of the month. Cross base oil plant has capacity to make 5,000 b/d of naphthenic oils, and the producer declared force majeure shortly after the plant was shut down.
Upstream, West Texas Intermediate futures dipped below $28 per barrel on Tuesday as equity markets remained weak, while forecasts of mounting U.S. crude stockpiles erased hopes that demand would grow quickly enough to ease oversupply in the short term.
WTI settled on the CME/Nymex at $27.94 per barrel on Feb. 9, down $1.94/bbl from its Feb. 2 settlement of $29.88.
Light Louisiana Sweet wholesale spot prices closed at $31.26 on Feb. 8, compared with $32.85/bbl on Feb. 1, according to data from the U.S. Energy Information Administration.
Brent was trading at $30.32/bbl on the CME on Feb. 8, down $2.40/bbl from $32.72 a week earlier.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.