Tight supply alongside robust demand continues to define the U.S. base oil arena, although summer doldrums are having an impact on day-to-day activity. Motivas sales allocation has ended, and prices are moving in the naphthenic sector.
Sources confirmed that Motiva lifted its sales allocation last Friday, July 16. In mid-May, the company had placed its customers on a sales allocation plan of 50 percent of historical contractual volumes for Star 6 (220 vis) to 75 percent for all other grades. As of this week, all orders are expected to be filled and shipped without delay.
Several other producers are not as lucky and continue to operate under sales controls.
Holly maintains a 50 percent sales control on its bright stock production, while other API Group I producers are also extremely tight on many grades, but particularly heavy vis and bright stock. Chevron continues its 75 percent sales allocation program, which was implemented on June 1. The company anticipates having an improved supply situation at its Richmond, Calif., Group II plant in October to November.
American Refining Group said it experienced an operating glitch last week at its Bradford, Pa., site resulting in a loss of bright stock production. This situation affected bright stock only, and ARG experienced normal production on all other viscosity grades.
The company had anticipated a speedy recovery, and the plant is now back online, but ARG said it will remain on sales control through September.
Cross Oil said it adjusted its mid and heavy pale oils to levels matching its internal postings, effective today, July 21. The company also removed all temporary voluntary allowances (TVAs) due to tight supply availability amid strong demand. A week earlier Ergon upped its 60 pale oil price by 20 cents/gal.
Buyers indicated that most naphthenic suppliers are nudging prices higher regularly for all grades, given the lack of spot material and robust demand. In many cases, prices for light and mid vis pale oils are currently pegged in the $2.80/gal to $3.10/gal FOB range, while heavy grades are assessed at $2.95/gal to $3.30/gal FOB. In comparison, paraffinic base stock values are running around 30 to 60 cents per gallon higher, according to a number of players.
On a bright note, Nynas reports that the Isla refinery on the island of Curacao in the Netherlands Antilles is now up and running and producing naphthenic products.
Meanwhile, due to a particularly tight supply situation seen for Group II grades, it is understood that several cargoes from Korea have headed or will head to the U.S. Gulf, U.S. West Coast and possibly Mexico during July and August. Total volumes to be imported are upwards of 13,000 metric tons of several grades. Sources also note that a 5,000 to 6,000 ton shipment could find its way into the Brazilian market in late August.
Group III base stocks continue to be exceptionally snug with suppliers unable to satisfy all customer requirements. In most situations, pre-scheduled orders can be achieved, but volumes over and above are difficult to fill.
Upstream, crude oil futures began to firm once again on fresh reports of developing storms in the Caribbean. (Late last week, oil futures drifted below the $77 per barrel mark.) The National Hurricane Center said that a weather system over Puerto Rico and the Dominican Republic has a 40 percent chance of becoming a tropical cyclone. An Energy Department report due tomorrow is anticipated to reveal that crude oil stockpiles dropped last week in the United States, according to industry surveys.
At the close of the Tuesday, July 20, NYMEX session, front-month light sweet crude futures ended the day at $77.54 per barrel, a modest gain of 39 cents compared to the July 13 close at $77.15/bbl.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.