U.S. Base Oil Price Report


While base oil supply and demand hovered at predicted levels for the month of June, participants’ attention remained focused on crude oil price fluctuations, as there were concerns that socio-political tensions could keep up the pressure on values.

A few factors could cause oil futures to rise, including the implementation of United States sanctions on Iran, the drop in crude oil exports from Venezuela, and the possible extension of the Organization of the Petroleum Exporting Countries’ production cuts, analysts said.

The effect that new trade restrictions could have on Iranian oil exports have not yet been determined, and it was also unclear whether other countries would support the sanctions.

At the same time, market observers pointed out that crude prices likely peaked in May when West Texas Intermediate reached $72.90 per barrel, and have softened since then. The market appears to be fairly balanced at the moment, and prices could continue to slide if there is an increase in production.

Indeed, oil futures plunged on Tuesday on reports of higher Saudi Arabian output, together with increased talk that OPEC and other major oil producers might decide to raise production when they meet in Vienna on June 22.

Trade tensions between the U.S. and China have also intensified, feeding concerns over a possible decline in energy demand.

WTI futures settled at $65.07 per barrel on the CME/Nymex on Tuesday, June 19, down $1.29/bbl from $66.36/bbl on June 12.

Light Louisiana Sweet crude wholesale spot prices settled at $73.76 per barrel on June 18, compared to $74.60/bbl on June 11, according to the U.S. Energy Information Administration.

Brent settled at $75.08/bbl on the CME on June 19, down 80 cents/bbl from $75.88/bbl on June 12.

In the base oils market, demand has started to show the typical behavior before the start of the summer holiday period, slowing down in a couple of segments, but remaining steady in others.

The heavy-vis cuts continued to be described as more plentiful, but there was a slight difference between the API Group I and Group II tiers.

The Group I segment was deemed tighter given the smaller number of domestic producers, and healthy requirements for most grades against recent production outages. This has helped maintain spot prices at steady levels, sources said.

Additionally, demand from Mexico has also contributed to a tightening of the Group I cuts. While orders have softened a bit and Mexican buyers were looking for lower-priced cargoes, there was still quite a lot of buying interest, sources said. “Business in Mexico is not as robust as during the rush in the spring, but prices have been stable for the last six to eight weeks,” a source noted.

Fundamentals on the naphthenic side of the business were stable, with supply deemed well-balanced against demand and prices reported as unchanged week on week.

Upstream, low sulfur vacuum gas oil was at Jul WTI crude plus $13.75/bbl ($79.60/bbl) and high sulfur VGO at crude plus $12.50/bbl ($78.35/bbl) on June 18. By comparison, low sulfur VGO was hovering at $79.85/bbl and high sulfur VGO at $78.60/bbl on June 11, 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.

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