The spring season has yet to gain impetus, as several factors such as adverse weather in many areas of the United States, stock market fluctuations, and vacillating crude oil prices appeared to dampen base oil buying activity.
Nevertheless, suppliers remained optimistic that demand was likely to improve now that the Spring break was over, most participants were back assessing product needs for the next few months, and lubricant manufacturers have started to prepare stocks for the busy summer driving season.
Requirements for certain grades such as the API Group I and II cuts have been fairly steady, with the Group I segment described as tight given limited spot availability, and a Group I plant turnaround still underway.
The HollyFrontier plant in Tulsa, Oklahoma, was heard to be off-line for maintenance, but should be brought back up in the next few days. The unit can produce 9,500 barrels of Group I oils per day, and the producer had built inventories ahead of the shutdown to meet contractual requirements during the outage.
Spot cargoes from other Group I producers were also heard to be limited, with one of the suppliers heard to have ceased offering the same competitive export prices to Mexico it had been proposing through its distributor at the end of the year.
Buying interest from Mexico was heard to have remained fairly healthy, with sources mentioning that truckload customers were still pulling steadily out of Brownsville.
A number of Group II cargoes were heard to have emerged for spot export transactions, and while prices have been holding, there is a sense that they may be exposed to downward pressure if demand does not pick up.
Availability of Group III cuts was deemed adequate, although one of the suppliers, SK Lubricants, was monitoring volumes closely during an ongoing turnaround at its base oil plant in South Korea.
Another Group II/III plant that was expected to be restarted during the first half of April was Petro-Canadas Mississauga, Canada, unit, which shut down for a 40-day turnaround in March. The unit can produce 11,660 b/d Group II and 4,000 b/d Group III base oils and was heard to have extended the turnaround by about one week from its original restart date.
On the naphthenic front, supply and demand were deemed balanced, prices were holding at steady levels, and no unexpected changes emerged this week.
Upstream, crude oil futures settled higher on Tuesday, but gains were capped by expectations that data due to be released on Wednesday would show U.S. crude supplies have risen for the second straight week.
Oil prices had slipped on Monday, as concerns that Washington could reintroduce sanctions against Iran, OPECs third-biggest oil producer, quieted down. Also potentially weighing on markets were rising trade tensions between the U.S. and China.
On Tuesday, April 3, West Texas Intermediate futures settled at $63.51 per barrel on the CME/Nymex, down $1.74/bbl from $65.25/bbl on March 27.
Light Louisiana Sweet crude wholesale spot prices settled at $65.75 per barrel on April 2, compared to $67.84/bbl on March 26, according to the U.S. Energy Information Administration.
Brent was trading at $68.12/bbl on the CME on April 3, down $1.99/bbl from $70.11/bbl on March 27.
Low sulfur vacuum gas oil was at May WTI plus $12.75/bbl ($75.76/bbl) and high sulfur VGO was at crude plus $11/bbl ($74.01/bbl) on April 2. By comparison, low sulfur VGO was hovering at $77.05/bbl and high sulfur VGO at $76.05/bbl on March 26, according to data published by PetroChemWire.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.