U.S. Base Oil Price Report


The API Group I base oils segment continued to show signs of tightening, while some of the Group II grades were regaining balance. This week brought weather-related concerns again, as Hurricane Florence headed toward the Carolinas and Virginia and was expected to make landfall by Thursday.

While there are no base oil facilities directly in the path of the storm, a number of lubricant production units are located in the potentially affected areas.

Chemlube International operates a lubricant blending plant and shipping facility in Savannah, Georgia, close to the South Carolina border, and it also supplies base oils from this location.

While blending operations themselves may not be affected by the hurricane, a Chemlube source said, there could be implications for logistics and transportation. The producer was hoping to advance some shipments that had been scheduled for the end of the week, or early next week, so as to avoid possible delays following the storm.

Amalie Oil operates blending facilities in Charleston, South Carolina. The company planned to close the plant around 4 p.m. on Wednesday, Sept. 12.

It was not clear how long the plant would remain shut down, but should there be some flooding in the area, then the start-up would have to be delayed until the water recedes, even if the facilities suffer little damage, market sources commented.”

There could also be staff shortages since there have been mandatory evacuations in the coastal areas, and roads would be used for evacuation purposes, so no product transportation was likely to be allowed.

Other effects that could be expected would be a lack of trucks for less essential lube transportation, as most vehicles would be utilized for the transport of fuels, should the storm disrupt fuel deliveries to gas stations for a few days.

The railroad companies could likely be pulling railcars away from the coast – fully loaded or empty – and this would further affect logistics, sources added.

In terms of base oil market activity, sources said that some segments had picked up the pace slightly this week, with Group I base stocks tightening up as a result, and some of the Group II cuts reported as more balanced than a couple of weeks ago.

At least one large Group II supplier was heard to have withdrawn from offering spot cargoes, and another was also less visible on the spot scene than in previous weeks.

Mexican buyers have been diligently procuring different base oil grades from the United States because of a lack of supply from the local producer, Petroleos Mexicanos (PEMEX). Bright stock, in particular, appeared to be in high demand.

Some rail issues in Mexico have resulted in more volumes being moved south via trucks out of Brownsville, according to sources.

As far as other exports were concerned, buying appetite from Brazil and Europe was said to have subsided, while there were reports of a large U.S. base oil cargo moving to Africa this month, with no further details available.

Nevertheless, domestic base oil availability was still deemed fairly ample and there continued to be downward pressure on spot pricing.

Upstream, crude oil futures climbed to their highest level in a week, boosted by the approach of Hurricane Florence, which could result in an increase in fuel demand and threaten the flow of gasoline through the key Colonial pipeline.

The U.S. government also lowered its forecasts for domestic production amid concerns over the potential for tighter global supplies if the U.S. renews sanctions on Iran.

On Tuesday, West Texas Intermediate (WTI) October futures settled at $69.25 per barrel on the CME/Nymex, down 62 cents per barrel from $69.87/bbl on Sep. 4.

Light Louisiana Sweet crude wholesale spot prices settled at $74.60 per barrel on Sep. 10, compared to $76.25/bbl on Aug. 31, according to the U.S. Energy Information Administration.

Brent was trading at $79.06/bbl on the CME Tuesday, Sep. 11, up $1.63/bbl from $77.43/bbl on Sep. 4.

Low sulfur vacuum gas oil was at Oct WTI crude plus $18/bbl ($85.54/bbl) and high sulfur VGO at crude plus $17/bbl ($84.54/bbl) on Sep. 10. By comparison, low sulfur vacuum gas oil was hovering at $85.87/bbl and high sulfur VGO at $84.87/bbl on Sep. 4, 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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