With summer vacations in full force and U.S. Independence Day celebrated earlier this week, base oil activity is livelier than expected. Business usually subsides in the early days of the third quarter, but suppliers say demand is strong with no signs of slowing.
The downside to this dynamic is the fact that overall supply is exceptionally tight, leaving little room for pure spot opportunities to materialize, sellers say. Several large producers anticipate that there will be no real improvement to depleted inventories until the fourth quarter.
Domestic producers are utilizing all available gallons to fulfill as many customer orders as possible, but there are still shortages.
Meanwhile, several naphthenic providers point out that there has been a significant shift in the usage of paraffinics versus pale oils. A number of downstream manufacturers and blenders that had used solvent neutral paraffinics for certain applications are now consuming more naphthenic base stocks instead, they say.
One key reason for the shift, apart from the obvious shortage of paraffinic grades, is that pale oils can run anywhere from 25 cents per gallon to 75 cents/gal cheaper, depending on the viscosity and supplier. For instance, prices for some light and mid vis pale oils are currently pegged in the $2.70 to $3/gal FOB range, while neutrals are assessed at $3.15 to $3.45/gal FOB for similar cuts.
Regarding the paraffinic sector, posted prices remained unchanged from the previous week with no fresh increase attempts by producers in the API Group II segment. Postings for Group I, II+ and III/III+ were adjusted upward by 15 to 20 cents/gal in June, with Group II posted prices last amended in late April-May.
At the close of the Tuesday, July 6, NYMEX session, front month light sweet crude oil futures ended the day at $71.98 per barrel, a loss of $3.96 from the week earlier settlement at $75.94/bbl.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.