A majority of base oil suppliers reported steady business and balanced-to-tight conditions, although there were some variations, depending on the grade and whether the seller was more focused on domestic or export sales.
From most accounts, the API Group I segment showed snug availability, with recent sales exhausting producers inventories, although demand for Group II cuts has been healthy as well.
Business has been strong and our tanks are close to empty, a supplier conceded, adding that it had not been able to participate in numerous export opportunities due to its low stocks.
Another producer agreed and noted that between orders from domestic consumers and export transactions, its inventories had been depleted and the seller had to be selective as to which product requests it was able to entertain.
The snug supply situation has resulted in some shipments being delayed, and it was heard that this had also affected a number of product movements into Mexico, where buying interest for material produced in the United States was still deemed healthy. One roadblock to business appeared to be a dearth of Mexican trucks for transportation, sources commented.
There has also been an improvement in Group I bright stock domestic demand, and suppliers preferred to sell within the local market, or to destinations in Latin America, as prices in other regions such as Europe had weakened and transaction levels were not workable.
Availability of Group II and III base oils seemed more abundant in comparison, with sources noting that there had been less need to ship U.S. Group II base oils to Europe since the start-up of ExxonMobils plant in Rotterdam, The Netherlands. In fact, it was heard that the refiner was proposing to supply customers with Rotterdam product out of its New York Harbor storage, but this could not be confirmed.
Participants continued to keep an eye on crude oil numbers, which showed slightly erratic behavior so far this week. On Tuesday – after inching up the previous session – crude oil futures slipped on concerns of a prolonged U.S.-China trade conflict, which offset the effect of tensions between the U.S. and Iran.
Chinese President Xi Jinping said China was embarking on a new Long March, signaling no prompt end to the trade war.
Meanwhile, President Donald Trump on Monday threatened Iran with great force if it attacked U.S. interests in the Middle East, while Iran said on Tuesday that it would resist U.S. pressure, according to a report by CNBC.com.
Mounting tensions with Iran, together with news that OPEC and its allies were likely to extend their deal to curb production into the second half of the year offered crude prices some support.
On May 21, West Texas Intermediate April futures settled at $62.99 per barrel on the CME/Nymex, up $1.21/bbl from $61.78/bbl on May 14.
Brent futures for July delivery closed at $72.18/bbl on the CME on May 21, and had settled at $71.24/bbl on May 14 for June futures.
Light Louisiana Sweet crude wholesale spot prices settled at $71.42/bbl on May 20, compared to $69.57/bbl on May 13, according to the Energy Information Administration.
Low sulfur vacuum gas oil was at June WTI plus $17.75/bbl ($80.85/bbl); high sulfur VGO was at crude plus $18/bbl ($81.10/bbl) on May 20. By comparison, low sulfur VGO was hovering at $77.54/bbl and high sulfur VGO at $77.04/bbl on May 13, 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.