Despite the fact that base oil price adjustments are not entirely unusual towards the end of the summer, a posted price decrease introduced by Motiva this week came as a bit of a surprise to many players.
Motiva reduced its API Group II STAR 4 (105 SUS) grade by 5 cents per gallon, its STAR 6 (220 SUS) by 10 cents/gal and its STAR 12 (600 SUS) by 21 cents/gal, effective Aug. 15.
While there were many different factors influencing the producers decision, the decrease was thought to be intended to keep postings relevant, and reflect the direction of the base oil market, in spite of crude oil price spikes over the last few weeks.
Base stock requirements typically decline at the end of summer, supply tends to lengthen, and producers often make price adjustments to entice buyers to commit to orders and remain competitive.
The supply and demand balance has remained unusually tight during the summer, with several suppliers still noting that they currently have enough product to meet contractual obligations, but little material to offer on a spot basis.
The snug conditions were thought to have been the reason behind two price increase initiatives that emerged only about two weeks ago: One introduced by Chevron, and a second one by Kleen Performance Products.
Both producers increased a majority of their base oil grades by 10 cents per gallon at the time.
Other producers opted for continuing to monitor market developments and maintained postings at steady levels between the end of July and mid-August, with no further revisions noted.
Meanwhile, crude oil futures slipped on Monday after climbing to two-month highs the previous week as a stronger dollar and global oversupply concerns dampened sentiment.
The uncertainties centered on demand in China – the second biggest oil consumer in the world –
as Chinese oil refineries operated at their lowest daily rates in nearly a year in July.
Additionally, on Monday, Shells Nigerian unit lifted the force majeure on Bonny Light crude oil exports that had been in place since the middle of July, adding to concerns about an oil glut.
At the same time, Asia was anticipated to benefit from any potential U.S. sanctions on Venezuelas oil sector, given that exports from the South American OPEC member could be redirected to the region, according to a Reuters report.
The U.S. government is considering sanctions on Venezuelas oil industry in response to the ruling Socialist Partys crackdown on officials and parties opposed to the government. An embargo against Venezuelan crude could block imports of about 740,000 barrels per day to the United States.
On Tuesday, Aug. 15, West Texas Intermediate futures settled on the CME/Nymex at $47.55 per barrel, down $1.62/bbl from $49.17 per barrel on Aug. 8.
Light Louisiana Sweet wholesale spot prices closed at $50.34 per barrel on Aug. 14, compared with $51.92 per barrel on Aug. 7, according to data from the U.S. Energy Information Administration.
Brent was trading at $50.80/bbl on the CME on Aug. 15, down $1.34/bbl from $52.14/bbl on Aug. 8.
Low sulfur vacuum gas oil was trading at Sep WTI plus $9.50/bbl ($57.09/bbl), and high sulfur VGO at crude plus $8.25/bbl ($55.84/bbl) on Aug. 14. In comparison, low sulfur VGO was at $57.79/bbl, and high sulfur VGO at $56.39/bbl on Aug. 7, 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.