U.S. Base Oil Price Report

The summer doldrums appear to be a touch more palpable this week in downstream lubricant markets, and this is expected to result in slower demand for base oils over the coming weeks.

Base stock requirements generally tend to slow down during the warmer months, but orders had been coming in at a fairly decent pace until a few days ago, sources said.

The slowdown was anticipated to exacerbate the lengthening supply in some base oil segments, such as the heavy-viscosity grades within the API Group II category.

Several U.S. refiners have been able to manage inventories by placing product into the export market. Parcels were heard to have been shipped to Mexico, Brazil and India, but these markets are also getting saturated now, sources explained.

Within the domestic supply system, some producers, including the rerefiners, who are typically not very active on the export front, are facing product surpluses and have started to offer discounts to stimulate sales.

Nevertheless, posted prices remained stable this week, supported by firm feedstock costs, although rumblings continued to be heard about downward price pressure possibly having an effect on prevailing indications if the oversupply situation becomes more pronounced in coming weeks.

There continue to be spot opportunities for Group I cuts, with suppliers receiving calls from traders and distributors looking to put cargoes together, according to sources.

Competition within the Group III segment was ongoing, with availability outpacing demand and, aside from the traditional supply sources, additional cargoes expected to enter the U.S. system from the Middle East in coming months.

On the naphthenics side of the business, activity was heard to be steady, with steep feedstock prices still squeezing producers margins, but no price adjustments were mentioned this week.

Upstream, crude oil futures extended gains on Tuesday amid concerns over fresh supply disruptions. News about output issues at the Knarr shelf off the coast of Norway added pressure on prices as supply disruptions in Libya and Venezuela persisted, while looming U.S. sanctions on Iran have reduced buying interest for the countrys crude exports.

WTI futures settled at $74.11 per barrel on the CME/Nymex on Tuesday, July 10, down 3 cents/bbl from $74.14/bbl on July 3.

Light Louisiana Sweet crude wholesale spot prices settled at $75.68 per barrel on July 9, compared to $76.39/bbl on July 2, according to the U.S. Energy Information Administration.

Brent settled at $78.86/bbl on the CME on July 10, up $1.10/bbl from $77.76/bbl on July 3.

Low sulfur vacuum gas oil was at Aug WTI crude plus $10.25/bbl ($84.10/bbl) and high sulfur VGO at crude plus $9/bbl ($82.85/bbl) on July 9. By comparison, low sulfur VGO was hovering at $85.65/bbl and high sulfur VGO at $84.19/bbl) on July 2, according to data published by PetroChemWire.

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