No big surprise that U.S. base oil activity should quieten heading into July, as the summertime blues take hold. Many players will be off enjoying vacations while at least one large planned shutdown gets under way. This, in conjunction with other small two-to-three-week plant closures, takes place in the coming months.
One of the crowning glory moments for buyers occurred in early June, as producers issued posted price decreases ranging from 20 cents to 45 cents per gallon. Just ahead of the decreases reaching the market, consumers had highly anticipated the action would manifest. After all, they had watched as crude values shed roughly 24 percent off their highs seen in late February and early March. Other key feedstock components used in formulating base oil prices, like vacuum gas oil, relinquished some of their earlier gains as well.
Throughout May and into June, demand was as described as decent by suppliers in spite of summer holidays commencing. Overall inventory positions on the production side were deemed balanced-to-tight, depending on grade and producer.
But there is a threat that availability could tighten further, as API Group II producer Motiva sails towards a planned downtime for its Port Arthur, Texas, refinery in early July. This comes on top of that facilitys unplanned outage on May 12, which caused an interruption in production and a subsequent sales allocation of 50 percent for its Star 6 base stocks that is still being enforced at this writing.
All eyes continue to closely watch the financial meltdown in Europe, intensified now by banking woes in Greece and Spain. The U.S. economy appears to be in better shape, but many analysts say it is stalling in the face of the ongoing issues in Europe.
Making it through July and August will be tough, a number of sources lament, and the months will likely represent the summer doldrums in the truest sense – slow and quiet. How each supplier or buyer makes it through these predictably tough few months will work itself out, but for now they can only make the best out of whats on the market table.