The U.S. base oils market is mired in a transitional period, as the spring buying season has not yet kicked in and buyers are just starting to check prices and availability for their upcoming orders.
A number of suppliers mentioned a slight uptick in buying interest in the domestic market, with some traders looking to secure spot barrels. However, it appears that they are having some difficulties in securing sizeable spot volumes.
While the heavy-viscosity oils, both in the API Group I and II categories continue to be described as tight, there has been particular interest in securing bright stock cargoes, according to sources, although a couple of sellers reported fairly average business for this cut. Nevertheless, there were sporadic reports of bright stock spot prices inching up by a few cents per gallon.
Price increases initiated by a vast majority of naphthenic and paraffinic base oil producers in late December/early January have been implemented smoothly, sources said.
Blenders are still reporting fairly slow market conditions, but activity is expected to pick up later this month with the approach of the busier spring production period.
On the export front, there has been some concern that recent unrest in Mexico due to gasoline price hikes, and tensions between the U.S. and Mexico over trade policy changes could impact base oil sales negatively.
Suppliers explained that Mexican consumers are still securing U.S. product, but they are nervous about what the policy changes might entail for future purchases.
President Donald Trumps threat to impose taxes against Mexico to rebalance trade and pay for a wall between the two countries has brought about the worst crisis in U.S.-Mexican relations for decades, according to media reports.
Some Mexican buyers are looking for potential sources of product in other markets, in case it becomes difficult to secure U.S. material. Others still appear eager to purchase decent size volumes in the U.S. and were in discussions with sellers during the week, sources noted.
Upstream, crude oil futures rose on Tuesday on a weak dollar and reports that suggested that OPEC members were cutting output as agreed.
U.S. light crude settled higher than the previous session, but posted its first monthly decline since October. It fell 1.7 percent in January as U.S. supply concerns offset production cuts by other producers, according to CNBC.
West Texas Intermediate futures on the CME/Nymex settled at $52.81 per barrel on Jan. 31, down 37 cents per bbl from the Jan. 24 settlement of $53.18 per bbl.
Light Louisiana Sweet wholesale spot prices closed at $54.13 per barrel on Jan. 30, down from $54.45 on Jan. 23, according to data from the U.S. Energy Information Administration.
Brent was trading at $55.70 per bbl on the CME on Jan. 31, up 26 cents per bbl from $55.44 per bbl on Jan. 24.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.