U.S. Base Oil Price Report

Calumet communicated a posted price decrease for its API Group I base oils, rounding up a series of decreases during which other Group I producers had sought similar adjustments.

Calumet will be lowering the price of its Group I grades by 15 cents per gallon, effective Dec. 20. The producer will not be reducing Group II pricing at this time.

ExxonMobil, HollyFrontier and Paulsboro had also decreased Group I postings 15 cents/gal between Dec. 4 and Dec. 7.

Group I supply was deemed more than adequate to cover current requirements, although some sources noted that the heavy-viscosity cuts and bright stock appeared to be tightening on a global scale as demand remained fairly steady, while supply has been declining.

Group II spot prices remained soft, with orders having declined with the approach of the year-end holidays.

A source commented that the sharp drop in crude and fuel prices had resulted in subdued activity, as everyone was "holding back from buying anything as much as possible."

Following a fairly tumultuous couple of months in terms of pricing activity, the base oils market appeared ready for a year-end reprieve.

Participants agreed that there were still many uncertainties plaguing the market and that, aside from seeing ample supply and softer requirements, they could not glean a clear course for future prices.

"January will be interesting, with refinery cutbacks and the possibility of crude moving up again. Its too hard to predict," a source remarked.

Between mid-November and early December, a majority of paraffinic producers not only implemented one, but two rounds of decreases. These posted price cuts were mostly prompted by lengthening supply and tumbling crude oil values.

During the first round of decreases - which went into effect between mid-November and early December - a majority of paraffinic producers lowered posted prices between 20 to 25 cents per gallon.

Then, on Dec. 4, sources reported that ExxonMobil had again reduced all of its base oil postings by 15 cents - a move that was somewhat surprising, but was quickly followed by a good number of API Group I, II and II+ producers.

Motiva was a bit of an exception in that the producer marked down its Group II and III postings by 25 cents per gallon across the board, effective Dec. 11. The producer had not increased prices back in October and early November, and therefore did not adjust prices down during the first round of 20 to 25 cents/gal decreases.

On the naphthenic front, producers Ergon, Calumet and San Joaquin did not adjust prices in mid-November, but ultimately decided to lower prices by 20 cents per gallon between Nov. 30 and Dec. 6, while Cross Oil marked prices down by 3-8 percent on Dec. 10.

Upstream, crude oil futures continued on a downward trek and plummeted on Tuesday on the back of global equity sell-offs and continued concerns that the OPEC/non-OPEC production cuts may not be enough to rebalance an oversupplied market, especially if fears of slowing global economic growth materialized, Oilprice.com reported. The stock sell-off came at the start of the two-day Federal Reserve meeting, which was widely expected to result in another interest rate hike on Wednesday.

Futures traded below the $50 per barrel mark on Tuesday, Dec. 18, with West Texas Intermediate January 2019 futures settling at $46.24 per barrel on the CME/Nymex, down $5.41/bbl from $51.65/bbl on Dec. 11.

Brent futures closed at $56.26/bbl on the CME Tuesday afternoon, and had settled at $60.20/bbl on Dec. 11.

Light Louisiana Sweet crude wholesale spot prices settled at $56.40/bbl on Dec. 17, compared to $57.95/bbl on Dec. 10, according to the EIA.

Low sulfur vacuum gas oil was at Jan WTI plus $14.25/bbl ($65.45/bbl) and high sulfur VGO was at crude plus $14/bbl ($65.20/bbl) on Dec. 15. By comparison, low sulfur VGO was hovering at $66.75/bbl and high sulfur VGO at $66.25/bbl on Dec. 10, according to data published by PetroChemWire.

In other news, members of the Mercosur bloc and the European Union were unable to reach a free trade agreement during the latest round of talks that took place in Uruguay Dec. 10-13, but negotiations were expected to resume in 2019, media sources reported.

Mercosur currently includes Argentina, Brazil, Paraguay and Uruguay. Venezuela's membership from Mercosur was suspended in December, while Bolivia was being considered for membership, according to Mercosur's website.

German Chancellor Angela Merkel expressed concern to legislators that the new Brazilian government of nationalist President Jair Bolsonaro would make a deal harder to reach, Reuters reported.

Bolsonaro, who was elected in October, has promised to reduce Brazils engagement with regional blocs like Mercosur and pursue bilateral relations instead.

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