U.S. Base Oil Price Report

The Labor Day holiday week would have been fairly uneventful except that attention was focused on the possible impact to production and transportation of severe weather conditions in the southeast of the United States.

Participants kept an anxious eye on reports about Hurricane Dorian's trajectory as it moved towards the states of Florida, Georgia and the Carolinas. The Category 5 hurricane (later downgraded to Category 3) battered the Bahamas on Sunday and Monday, and was forecast to pass near east Florida overnight on Tuesday, then skirt the Georgia and South Carolina coasts, possibly causing storm-surge flooding, the National Hurricane Center said.

At least five people have been confirmed dead on Grand Bahama Island, and thousands have been evacuated from coastal areas in the U.S.

A lubricant blending plant in Savannah, Georgia, has been shut down and evacuated, with operations expected to be halted until Thursday and restarted on Friday if conditions allow, a company source said. All rail and truck movements in the Savannah area are halted as well, the source added.

A number of ports were closed ahead of the storm, while others were preparing for possible closures. Jacksonville Port Authority closed all terminals to commercial trafficon Monday morning, and the Port of Miami was also closed, port authorities reported. The Port of Charleston will be closed on Wednesday and Thursday and reopen on Friday, while Tampa and Baltimore ports remained open as of early Tuesday.

Dorian served as a reminder that the hurricane season will not be over for another three months, and that both producers and consumers need to be prepared for unexpected production disruptions. Most participants pad inventories ahead of the hurricane season and have emergency plans in place, sources commented.

Sellers concurred that base oil business had remained steady over the last few weeks, "without any huge swings," although demand has softened compared to two months ago, when the summer driving season was in full swing.

The export market was also less dynamic, with Mexican buyers holding off on purchases in hopes that prices for U.S. product weaken on the back of softer fundamentals. It was also heard that there was some interest to move a couple of U.S. base stock parcels to Brazil.

Demand has also declined in Asia, and prices have retreated due to oversupply conditions. Asian producers were heard to be looking for alternative outlets for their products in the U.S. and Europe, and there were reports that two API Group II light-viscosity cargoes had arrived from South Korea and Taiwan in Brownsville, Texas, in mid-August.

Upstream, crude oil futures slipped on Tuesday, weighed down by the ongoing U.S.-China trade dispute that is dampening global economic growth. Prices were also affected by rising OPEC and Russian crude output.

The U.S. this week imposed 15 percent tariffs on a variety of Chinese goods, while China retaliated by imposing new duties on $75 billion worth of imports, exacerbating the trade war that has extended for more than a year. However, U.S. President Donald Trump said both sides were still likely to meet for talks later this month.

On Tuesday, Sept. 3, West Texas Intermediate futures settled at $53.94 per barrel on the CME/Nymex and had closed at $54.93/bbl on Aug. 27.

Brent futures for October delivery settled at $60.40/bbl on the CME on Sep. 3, and had closed at $59.51/bbl on Aug. 27.

Light Louisiana Sweet crude wholesale spot prices settled at $58.10/bbl on Aug. 30, and had traded at $56.69 on Aug. 26, according to the Energy Information Administration. The markets were closed on Sep. 2 due to the Labor Day holiday.

Low sulfur vacuum gas oil was at Oct. WTI plus $14.25/bbl ($70.96/bbl); high sulfur was at crude plus $14.50/bbl ($71.21 /bbl) on Aug. 30. There was no trading on Sep. 2 due to the holiday. By comparison, low sulfur VGO was hovering at $68.74/bbl and high sulfur VGO at $68.99/bbl on Aug. 26, according to data published by OPIS PetroChemWire.

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