U.S. Base Oil Price Report

A number of planned and unplanned plant shutdowns and steady demand have resulted in snug supply of certain base oil grades, and while availability was still deemed ample to cover requirements, extra spot barrels were harder to come by.

At least two base oil plants were heard to have completed routine maintenance over the last two weeks, while a plant in the Midwest was reported to be off-line due to severe flooding at the site. It was not clear what the extent of the damage might be, or when the plant may be able to be restarted, as further details were not forthcoming. Supplier sources said that a few customers who regularly purchase product from the producer had inquired about securing material elsewhere as they expected base oil deliveries from the plant to be delayed.

Market conditions were deemed generally stable, with demand for certain grades surpassing producers' expectations. "Overall business has been above average domestically," a supplier commented.

API Group I has experienced some tightening because of the shutdowns, combined with healthy demand, with bright stock cargoes said to be particularly difficult to find.

The Group II and III segments appeared to be adequately supplied, with Group III imports from Asia and the Middle East satisfying most of domestic requirements.

Spot prices had not climbed alongside posted prices when the last round of increases had been implemented in April on the back of steep feedstock costs, and suppliers were therefore more reticent about granting discounts for export transactions despite the ample availability of a few grades, sources noted.

Buyers were heard to be delaying orders for as long as possible in hopes that weakening crude oil and feedstock values would lead to lower spot numbers.

Upstream, crude oil prices remained under pressure due to signs of an economic slowdown that has started to affect fuel consumption. Prices were partly supported by a Saudi Arabian statement that hinted at the fact that OPEC producers may be close to an agreement to extend supply cuts.

On June 4, West Texas Intermediate July futures settled at $53.48 per barrel on the CME/Nymex and had closed at $59.14/bbl on May 28.

Brent futures for July delivery settled at $61.97/bbl on the CME on June 4, and had settled at $70.11/bbl on May 28.

Light Louisiana Sweet crude wholesale spot prices settled at $60.95/bbl on June 3.

High sulfur vacuum gas oil was at July WTI plus $18/bbl ($71.25/bbl) and low sulfur VGO was at crude plus $17.50/bbl ($70.75/bbl) on June 3. By comparison, high sulfur VGO was hovering at $76.38/bbl and low sulfur VGO at $76.13/bbl on May 24, according to data published by OPIS PetroChemWire. (There was no trading on May 27 due to the Memorial Day holiday).

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