Following the completion of the latest round of price increases, the base oils market settled into its usual routine, with orders coming in at levels expected for this time of the year, and supply deemed more than adequate to cover current requirements.
The Memorial Day holiday contributed to the easing of activity, with many buyers taking advantage of the subdued pace to gauge inventories and assess product needs for the next few months. The busy spring lubricants production season should be wrapping up, and base oil demand was expected to dwindle as a result, sources said.
The previous week culminated with two producers, Phillips 66 and Petro-Canada, implementing increases on their API Group II+/III base oils. Within this segment, SK decided to sit the latest round of increases out.
Phillips 66 lifted its Group II+ base oils by 18 cents per gallon, and its Group III grades by 15 cents/gal on May 23, while Petro-Canada raised the posted price of all its Group II+/III grades by 15 cents per gallon as of May 24. Both suppliers had previously increased the price of their Group II base oils earlier in the month.
A vast majority of base oil producers announced price hikes during the month of May, which also spurred several increase initiatives in the lubricants and additives markets.
There was some attention focused on Subtropical Storm Alberto, which was expected to hit Florida, Mississippi and Alabama last weekend, but sources said that while refineries always prepare for severe weather systems, Alberto was mostly predicted to bring heavy rains and flooding rather than strong winds, and no plants were heard to have shut down ahead of the storm.
Upstream, conditions were starting to shift, lifting some of the upward pressure that base oil prices had been under until this week.
Oil futures plummeted last Friday after having reached their highest level in over three years, with West Texas Intermediate dropping by close to 10 percent to trade near $66.00 per barrel. Global benchmark Brent crude oil fell by about 6 percent to trade around $76 per barrel, after peaking above $80.
The sharp price drop was triggered by Saudi Arabia, the biggest oil exporter in the world and de facto leader of the OPEC. Saudi energy minister Khalid Al-Falih said during a CNN-hosted panel in St. Petersburg, Russia, that he was in intensive discussions with Russia and other OPEC nations to pump more oil to ease global supply concerns, CNN.com reported. OPEC oil producers and Russia are due to meet in Vienna on June 22 to discuss the easing of supply caps, which have been in place since 2017.
WTI futures settled at $66.73 per barrel on the CME/Nymex on Tuesday, May 29, down $5.40/bbl from $72.13/bbl on May 22.
Light Louisiana Sweet crude wholesale spot prices settled at $75.17 per barrel on May 28, compared to $78.06/bbl on May 21, according to the U.S. Energy Information Administration.
Brent settled at $75.39/bbl on the CME on May 29, down $4.18/bbl from $79.57/bbl on May 22.
Low sulfur vacuum gas oil was unchanged at July WTI crude plus $10.25/bbl ($78.13/bbl) and high sulfur was at crude plus $10.25/bbl ($78.13/bbl) on May 25 (there was no trading on May 28 due to the Memorial Day holiday). By comparison, low sulfur VGO was hovering at $82.24/bbl and high sulfur VGO at $81.24/bbl on May 21, 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.