While suppliers had expressed concern regarding the supply length affecting the base oils business in the last quarter, it appears that the different strategies implemented to place product over the last few weeks have been effective. This included granting discounts and temporary voluntary allowances into select accounts, among other incentives.

A number of producers acknowledged that inventories were lower than anticipated and that in some cases, they had been unable to entertain new spot business because they were sold out of a number of products.

Buyers were also fairly satisfied with the state of affairs, as posted prices have not moved since May, although there were a couple of unsuccessful attempts at adjusting prices in July and September.

However, consumers and sellers alike kept a close eye on crude oil and feedstock prices, since the upward trend observed over the last couple of weeks was exerting pressure on base stock values.

In fact, suppliers noted that some of the base oil orders received since early December had likely been prompted by concerns over the steady climb in crude values.

A few transactions were finalized over the week, with participants noting that discounts had dried up and that there had been some unexpected business landing in their laps as a result. “We received orders from domestic customers that I didn’t think would be placed,” a producer conceded, adding that end-users were also concerned about the new diesel requirements and the possibility that light-viscosity product prices would be increasing.

While business into Mexico had slowed down in November and the first week of December, that segment, too, has seen a revival, with a number of transactions involving API Group I base oils finalized over the last few days. This might have partly been prompted by the reduced operating rates at the Pemex base oil plant in Salamanca, Mexico, as one of the base oil trains at the plant has not been running, an industry expert explained at a recent industry meeting.

Overall, product availability was deemed ample to meet requirement levels and no shortages were noted, which granted buyers some flexibility in terms of finding the most opportune sources of material.

Consumers have been preparing for possible tightening conditions as a couple of paraffinic and naphthenic plant turnarounds have been scheduled for the first quarter of the year. It was heard that Motiva would be completing maintenance at one of its base oil trains in Port Arthur, Texas, in February. Ergon‘s naphthenic plant in Vicksburg, Mississippi, was expected to undergo a turnaround for about forty-five days in March. There was no producer confirmation regarding the turnaround schedule.

Upstream, crude oil futures edged up to three-month highs and were holding firm, boosted by economic optimism, a weaker United States dollar and growing investor demand, OilPrice.com reported. The recent agreement by the OPEC+ to continue oil production curbs also provided some support, but was expected to fizzle out as global supply still seems to surpass demand.

On Tuesday, Dec. 17, West Texas Intermediate January futures settled at$60.94 per barrel on the CME/Nymex, and had closed at $59.24/bbl on Dec. 10. By comparison, WTI values were hovering at $56.10/bbl two weeks earlier, on Dec. 3.

Brent futures for February delivery were reportedat $66.10/bblon the CME on Dec. 17, up from $64.34/bbl on Dec. 10 and $60.82/bbl on Dec. 3.

Light Louisiana Sweet crude wholesale spot prices settled at $64.21/bbl on Dec. 16 and had closed at $62.59 on Dec. 9, according to the Energy Information Administration.

(Please note: The VGO prices that appear on this report will be temporarily suspended until arrangements with a new provider of the daily quotes are finalized).

Gabriela Wheeler can be reached directly atgabriela@LubesnGreases.com.

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