U.S. Base Oil Price Report


The U.S. base oil market appears to be in a holding pattern, with little change in buyers consumption levels or supply issues. Sources say this months paraffinic price hikes, of 5 cents to 35 cents per gallon, are sticking.

Although quiet, overall demand is deemed satisfactory for late January. Suppliers continue to cheer the fact that customer requirements in general are much improved over one year ago, when demand went very still. They add that sales are steadily growing for the coming months.

Several segments, including metalworking and rubber-related uses, have seen marginal growth, and this trend is expected to continue. Even demand for finished packaged goods is showing a positive advancement in sales.

Despite a recently completed round of price hikes in the paraffinic arena, the naphthenic sector has not moved prices since early November, when producers pushed up all grades by 25 cents per gallon. Market talk suggests that if crude runs back up to $80 per barrel, producers would be inclined to issue increases for all pale oils due to satisfactory demand alongside balanced inventory positions.

As noted in recent months, traders continue to suggest that finding large slugs of certain grades such as heavy neutrals and bright stock is still somewhat difficult. Conversely, some of the same spot buyers say that light and mid vis neutrals do seem more readily available.

Not all participants agree that the supply overview is imbalanced. Some say that there are limited spot volumes of any grade, whether it be light, mid or heavy viscosity. Also, a few buyers admit that there are no real bargains to be had as most producers are well balanced. They added that suppliers are not willing to negotiate prices lower and are standing firm on pre-established volume discounts.

Whether the majority of base oil production facilities are being operated at optimum rates or at reduced rates is still debated. Some players speculate that a number of larger sites continue to be run in an estimated range of 75 percent to 80 percent of capacity, while smaller plants may be cranking out production at near top levels. Despite the fact that producers will not comment on output performance, they do contend that supply/demand matters are balanced and customer orders are at expectations.

Looking upstream, crude oil prices have been knocked off their mid-January highs over $80 per barrel as oil stockpiles look plentiful going forward. In spite of another winter blast sweeping through much of the country, crude prices tumbled further during the past week.

Frigid temperatures that covered much of the U.S. in mid-December through mid-January helped drive oil prices to a 15-month high to around $83/bbl. But the same pattern is not holding up lately, energy analysts say, despite the recent cold snap.

Nevertheless, whether crude oil values will rebound or move lower remains uncertain, as opinions vary among the experts because of mixed market indicators.

At the close of the Tuesday, Jan. 26, NYMEX session, front-month light sweet crude futures ended the day at $74.71 per barrel, a loss of $4.31 compared to the Jan. 19 close at $79.02/bbl.

Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.

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