A tight supply and demand ratio continues to characterize the U.S. base oil market, with postings reported as stable, following a couple of price increases implemented in late July.
Base oil producers Chevron and Kleen Performance Products lifted most of their posted prices by 10 cents per gallon on July 26 and July 31, respectively. Chevrons API Group II 600R cut remained unchanged. The initiatives were said to have been driven by limited domestic supply and recent spikes in raw material costs.
No further price adjustments followed, but participants were heard to be monitoring the market carefully as the supply crunch continues to affect business, particularly as there is very little product available for spot transactions.
Despite the fact that spot prices have moved up in recent weeks, sellers said that even if buyers were willing to pay higher prices, they would not have any product to sell as most suppliers were focusing on meeting contractual obligations, leaving hardly any barrels for spot deals.
Demand for all base stocks remains generally healthy in the domestic market, while strong requirements continue to emerge in Mexico for API Group I cuts.
Sources said that traders have been able to bring some heavy grades and bright stock from origins such as Europe and Brazil to supplement U.S. offers into Mexico, but the mid-viscosity oils seem more difficult to find.
There was talk that brokers had been trying to arrange large shipments of about 3,000 metric tons of European bright stock into the U.S. Gulf to achieve lower freight rates, and then move some of this product into Mexico.
A couple of bright stock cargoes sold into Mexico were also heard to have been sourced from a Brazilian producer in recent weeks.
Naphthenic and rerefined base oil suppliers reported similarly tight conditions and robust requirements, with one rerefiner heard to be taking orders for October shipment already, and no extra cargoes to offer at the moment.
Upstream, crude oil futures were up slightly on Tuesday on the back of reports that Saudi Arabia was planning to cut exports next month, according to Reuters.
Saudi Arabia will apparently trim its crude oil allocation to customers worldwide in September by at least 520,000 barrels per day, Reuters reported. State oil giant Saudi Aramco will reduce supplies to most buyers in Asia, the leading consuming continent, by up to 10 percent to comply with a producers deal agreed late last year.
OPEC member and 10 non-members – including Russia – agreed to cut 1.8 million barrels a day in production to prop up crude oil prices.
West Texas Intermediate futures on the CME/Nymex traded at $49.17 per barrel on Aug. 8, up only 1 cent/bbl from $49.16 per barrel on Aug. 1.
Light Louisiana Sweet wholesale spot prices closed at $51.92 per barrel on Aug. 7, compared with $52.46 per barrel on July 31, according to data from the U.S. Energy Information Administration.
Brent was trading at $52.14/bbl on the CME on Aug. 8, down 49 cents/bbl from $52.63/bbl on Aug. 1.
Low sulfur vacuum gas oil was trading at Sep WTI plus $8.40/bbl ($57.79/bbl), and high sulfur VGO at crude plus $7/bbl ($56.39/bbl) on Aug. 7. In comparison, low sulfur VGO traded at $58.42/bbl and high sulfur VGO at $57.17/bbl on July 31, according to PetroChemWires Daily Refinery Focus.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.