U.S. Base Oil Price Report


Despite softer market fundamentals, posted base oil prices were holding steady, with some discounts granted on a case-by-case basis.

Producers explained that while lukewarm demand and ample inventories were placing downward pressure on prices, firm crude oil and feedstock values were supporting the current posted price structure.

A large producer was heard to have extended its temporary voluntary allowance for some of its customers, while other suppliers were granting markdowns for spot business as well, depending on volumes and other conditions. The discounts were more significant versus contract numbers for the heavier grades, buyer sources said.

Suppliers claimed that while they had seen the typical year-end slowdown in domestic orders, it had not been as acute as anticipated. Downstream, lubricant demand has decreased due to weakness in the manufacturing sector, and this was causing the decline in requirements for base oils.

Some segments of the market showed less availability of product than others, with the API Group I still seemingly more balanced than the Group II segment.

A Group I producer – whose plant has recently undergone a turnaround – was meeting contractual obligations, but was unable to offer any spot cargoes this month.

Offers for Group III barrels were abundant, and while suppliers were trying to protect accounts, there was not a significant push to conquer market share.

There were reports that domestic producers may be adjusting operating rates to avoid product overhang at the end of the year, while a couple of turnarounds were expected to be completed this week and in early December.

HollyFrontier was anticipated to have completed a three-week turnaround at its Group I plant in Tulsa, Oklahoma, on Nov. 18.

On Dec. 1, Calumet will start the second phase of a turnaround at its Group I/II plant in Shreveport, Louisiana, which will affect production of its light-vis cuts (60, 80, 100, 150 vis) only. The shutdown was expected to last approximately two weeks. The producer already completed the first phase of a maintenance program, which affected its mid to heavy-vis cuts (325, 600, 2500 vis) in early November.

Export activity has dwindled, both on the paraffinic and naphthenic sides. I agree that naphthenics have slowed down considerably, a seller acknowledged, while paraffinic base stock movements into Mexico and Europe have also declined.

Welcome news for exporters emerged from Europe this week. The European Commission has made a decision regarding the volume of Group II base oils that will be allowed to enter the European Union without a tariff, a source familiar with the negotiations said. After deliberations with EU member states on Nov. 14 and 15, the blocs decision-making body upheld its original proposal for a quota of 400,000 metric tons per year, or 200,000 every six months, effective Jan. 1. Any volumes surpassing the quota will be subject to duties of 3.7 percent. The quota covers Group II 150 neutral through 600N, while lighter Group II grades and Group III base oils will remain exempt from duties. (For more details, see EU Moves Toward Group II Quota in this weeks Lube Report EMEA).

Upstream, crude oil futures inched up on Tuesday morning, but tumbled later in the trading session on expectations that global oil supply would continue to rise in 2020, while demand would recede.

According to new figures from the International Energy Agency (IEA), non-OPEC supply could increase by 2.3 million barrels per day, nearly double the expected increment in demand at 1.2 million b/d. The forecast was based on a potential jump in U.S. shale production, as well as increased output from Brazil, Norway and Guyana. OPEC+ is scheduled to meet in Vienna next month to discuss next years oil production estimates.

Given the downturn in manufacturing during 2019, oil demand has shrunk, and crude prices only held up because of massive supply outages in 2019, analysts said.

OPEC also revised down its outlook for U.S. oil production growth for 2020, an indication that production growth is slowing down, mostly because of prices and persistent pressure from shareholders for higher returns at the expense of production expansion, OilPrice.com reported.

On Tuesday, Nov. 19, West Texas Intermediate December futures settled at $55.21 per barrel on the CME/Nymex, and had closed at $56.80/bbl on Nov. 12.

Brent futures for January delivery were reported at $60.91/bbl on the CME on Nov. 19, and had closed at $62.06/bbl on Nov. 12.

Light Louisiana Sweet crude wholesale spot prices settled at $62.72/bbl on Nov. 18 and had closed at $61.61 on Nov. 11, according to the Energy Information Administration.

Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase inExcel format.

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