Domestic base oil demand has softened slightly, but not to alarming levels, as activity is generally expected to decline in the summer, with the Fourth of July holiday next week likely to slow down business even further.
Suppliers also acknowledged that some segments of the market were seeing a supply overhang -namely the heavy-viscosity grades – although other base stocks were moving along at a fairly steady pace, and posted prices remained unchanged.
In recent years, some of the summer oversupply had been mitigated by opportunities to export product to India and China, but this year, the situation seems to be a bit different, sources said.
Supply in Asia was heard to be adequate, and Indian buyers were being courted by both northeast Asian and Middle Eastern suppliers, leaving fewer openings for product from more distant regions, sources explained.
At the same time, there continued to be reports of healthy buying appetite for United States base oils from Brazil and Mexico. Both the Brazilian base stock producer, Petrobras, and the Mexican producer, Pemex, were heard to be experiencing production issues and therefore, consumers continued to rely heavily on imports.
Buying interest for Group I of U.S. origin has been steady, and Group II is increasingly gaining acceptance in Brazil and Mexico, with some Group III barrels also sold to buyers in these two countries, sources added.
In other Group II market news, ExxonMobil announced on Tuesday that it was moving forward with a project to expand its Group II base oil and fuels capacity at its Singapore refinery. This expansion would be in addition to the one that is anticipated to be completed in Singapore in early 2019. A final investment decision is expected next year, and startup would be slated for 2023, the refiner indicated at the ICIS Asian Base Oils and Lubricants Conference taking place in Singapore this week.
Upstream, crude oil climbed on Tuesday, driven by Canadian production losses and uncertainty over Libyan exports. Prices were capped by prospects of increased OPEC supply and growing discussions about the trade discord between the United States and other major economies.
WTI futures settled at $70.53 per barrel on the CME/Nymex on Tuesday, June 26, up $5.46/bbl from $65.07/bbl on June 19.
Light Louisiana Sweet crude wholesale spot prices settled at $75.66 per barrel on June 25, compared to $73.76/bbl on June 18, according to the U.S. Energy Information Administration.
Brent settled at $76.31/bbl on the CME on June 26, up $1.23/bbl from $75.08/bbl on June 19.
Low sulfur vacuum gas oil was at August WTI crude plus $13.50/bbl ($81.58/bbl) and high sulfur VGO was at crude plus $12.50/bbl ($80.58/bbl) on June 25. By comparison, low sulfur VGO was hovering at $79.60/bbl and high sulfur VGO at $78.35/bbl on June 18, according to data published by PetroChemWire.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase inExcel format.