The U.S. base oils market was fairly quiet during the past week, as most consumers continued to absorb the impact of posted price hikes initiated by paraffinic producers in March. Otherwise, steady circumstances characterize the market heading into April.
Customer orders have generally reached levels many suppliers expected at this point. However, in some cases, demand has significantly improved. This is most evident when it comes to the heavier-end cuts, sellers say.
Buyers seeking bright stock, for instance, may have to wait for several weeks to receive necessary volumes given the overall tightness for this grade. In some situations, there could be even longer delays expected for deliveries of bright stock.
Neutrals 500, 600 and 700 are also deemed to be in tight supply, but availability is better than for bright stock, according to a few buyers.
Prices for bright stock are currently pegged in a range of $3.20 per gallon to upwards of $3.55/gal FOB for average sized lots. Some customers may pay a little less or even more, depending on quantities required. Price ideas for the heavier neutrals are pegged in a wider range, but in a similar territory as bright stock, according to a mixed bag of sources.
Consumers acknowledge that steep discounts for certain grades, offered by some sellers in the first quarter, have disappeared. In many cases, suppliers have also removed temporary voluntary allowances (TVAs). A few contract consumers said that agreed-upon prices have most likely bottomed out for now.
Looking upstream, crude oil prices are lofty at over $82 per barrel this week, buoyed by a year-long rally of global stock markets. Energy and oil traders often look to equity markets as a measure of overall investor sentiment. In fact, some analysts say that the oil complex has grabbed on to the stock indexes as a proxy for future oil demand.
Oil prices are range-bound as a result of optimism about a global economic recovery clashing with still weak oil market fundamentals, analysts suggest. But higher oil prices are also seen as reflecting efforts by fund managers to achieve positive figures to close out the first quarter of the year.
Also helping to prop up crude values was a recent report issued by the Commerce Department saying that personal spending rose in February, in line with analysts’ expectations. The news fed traders’ hopes that demand for crude would improve, which should support higher crude oil prices.
At the close of the Tuesday, March 30, NYMEX session, light sweet crude futures ended at $82.37 per barrel, a gain of 46 cents over the week-earlier settlement at $81.91/bbl.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.