The U.S. base oil picture is little changed from last week: the supply/demand situation is steady, with posted prices holding.
Sellers agree that the worrisome, tight base oil supply situation, that had been dominant for much of the summer, appears to be improving as this month progresses. They warned that this does not necessarily reflect ample availability, however, although customer orders are being met in a more timely manner than in the early days of the third quarter.
Suppliers inventory positions have been replenished to some extent, sources said, but this recent build in stocks is being closely guarded, given the prospect of a wicked hurricane season. A few sellers pointed out that any surplus product that may happen to become available is quickly sold to offshore buyers – often bringing better prices than domestic sales.
The National Weather Service recently revised its 2010 hurricane forecast, and the agency is predicting another strong year for tropical storms. Four to six ‘major hurricanes’ are expected out of 14 to 20 likely named storms.
The Atlantic hurricane season is now in its most active three-month stretch and stands a strong chance of becoming the 11th above-normal season in the past 15 years, according to federal forecasters.
June and July were less active than the National Weather Service’s Climate Prediction Center expected when it issued its initial seasonal forecast in May. But conditions in the Atlantic’s main hurricane-forming region suggest the season’s typical August-to-October peak could be very active.
In addition to watching out for severe storms, base oil players are keeping a close eye on upstream developments. Crude oil values have slipped the past few weeks, shedding about $9 per barrel since early August.
Oil analysts attribute this slump to a stronger U.S. dollar against other key currencies. Fresh concerns about the slowed pace of the global economic recovery, particularly following a disappointing report outlining less-than-stellar home sales for July, also helped push crude futures lower.
At the close of the Tuesday, Aug. 24, NYMEX session, front-month light sweet crude futures ended the day at $71.63 per barrel, a loss of $4.14 compared to the Aug. 17 close at $75.77/bbl.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.