The first full week of the new year is well underway, and there is fresh optimism in the U.S. base oil market. Producers are relieved to report that customer orders, at least so far, suggest that demand will be much improved from the dreaded first quarter of 2009. Buyers too confirm that they are requiring beefier volumes and that business for the coming six months appears to be at a more normal level than seen a year earlier.
Producers also said that inventory positions are in much better shape. Because there is limited surplus material at this point, they are less inclined to offer steeply discounted prices to potential buyers. In fact, in many cases, offers are holding firm for all grades, but certainly the heavy-end cuts are still the most desired base oils.
Regular domestic bright stock values are assessed in the $2.95 to $3.10 per gallon range FOB, depending on supply source and volumes. Neutral 500 through 700 prices are also steady and are pegged around $2.80 to $3.00/gal FOB. There are exceptions and there are some lower prices pitched by a few sellers, but generally these price bands are said to be indicative of the bulk of current domestic activity.
Export business is heard to be fairly fluid, with price ideas on average 10 cents to 15 cents/gal below those mentioned for domestic trade, according to several sources. A few other suppliers do not necessarily agree with these discounts and say that export quotes are nearer the domestic levels.
Meanwhile, crude oil prices are on the run-up, pushing through the $81 per barrel mark on Monday and continuing a rally that has been in play for the better part of past three weeks.
Energy analysts attribute higher oil prices to the likelihood of greater demand for crude in 2010, based on the gradual economic recovery seen in the last several months. They added that the near-term U.S. economic outlook also appears positive, helping hike oil values.
Additionally, colder-than-normal weather across the United States and gains by other currencies against the U.S. dollar helped support steeper crude prices.
At the close of the Tuesday Jan. 5NYMEX session, front-month light sweet crude futures ended the day at $81.77 per barrel, a gain of $2.90 from the week earlier settlement at $78.87/bbl.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.