U.S. Base Oil Price Report

The sedate pace seen over the last few weeks in the base oils market deepened with the approach of the Thanksgiving holiday that will be celebrated in the United States on Thursday and Friday this week.

Base oil demand typically slows down in November, and this year is no exception, although demand in some segments has been surprisingly steady, sources noted. A majority of API Group I suppliers, for example, said that inventories were manageable and there was not a significant product overhang.

While media outlets reported that the largest number of travelers in ten years would be taking to the road over the Thanksgiving weekend, lubricant suppliers said they had not seen a particular jump in automotive lube demand ahead of the holiday. "I would guess there is not a noticeable effect," one source said, while another agreed that it had been business as usual during the weeks ahead of the holiday, and that demand was anticipated to experience a decline in December.

Producers have focused efforts on reducing inventories ahead of the end of the year by offering discounts and temporary voluntary allowances, and expected fresh business to be discussed on the sidelines of the ICISPan American Base Oil conference taking place in Jersey City, New Jersey, next week.

Participants said that buyers look for "year-end bargains" and that a few spot transactions are typically finalized before the end of the month for December and first quarter shipments.

U.S. export volumes into Mexico have declined, both on the paraffinic and naphthenic side of the market, with consumers said to be working off existing stocks, or able to achieve competitive pricing from other sources.

There were also reports that several cargoes of Group II base oils were anticipated to be delivered to India over the next few weeks.

In production news, HollyFrontier was heard to be in the process of starting up its Group I base oil units in Tulsa, Oklahoma, following a routine turnaround which started in late October. The producer's inventories were described as balanced and the company has been meeting contract obligations as scheduled, a company source said.

Upstream, crude oil futures strengthened on optimism about a possible resolution of the U.S.-China trade dispute after a top decision-making body in China called for the country to strengthen protections for intellectual property, which was widely deemed an encouraging sign for its trade talks with the U.S., S&P Global Platts reported.

Expectations of a draw in U.S. crude inventories also boosted prices. Oil inventories typically begin to drop by mid-to late November as refiners complete autumn maintenance, thus increasing demand for crude, analysts said.

On Tuesday, Nov. 26, West Texas Intermediate December futures settled at $58.41 per barrel on the CME/Nymex, and had closed at $55.21/bbl on Nov. 19.

Brent futures for January delivery were reported at $64.27/bbl on the CME on Nov. 26, and had closed at $60.91/bbl on Nov. 19.

Light Louisiana Sweet crude wholesale spot prices settled at $62.92/bbl on Nov. 25 and had closed at $62.72 on Nov. 18, according to the Energy Information Administration.

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