While there was not much change in the U.S. base oil market this week, the overall supply/demand situation remains somewhat precarious.
Sources pointed out that most contract consumers are receiving their needed volumes, but depending on the segment and quantities required, some buyers are disappointed. Posted prices remained unaltered and net contract prices in general are holding firm.
Several large buyers reiterated that even though they are mostly achieving their prescheduled volumes, Chevrons recently reinstated 50 percent sales allocation along with Hollys ongoing sales control – also at 50 percent – are having an impact on deliveries, as well as the general state of the market.
A few other producers are also still struggling to supply their customers all necessary quantities of certain grades. Some shipments can be delayed up to two weeks, perhaps even longer, although there are no official sales plans involved here.
Several players commented that this has been a very active October so far, and has outstripped activity in previous Octobers. Some participants anticipate the year will end on a high note. There may be no fire sales seen in December due to the prevailing tight supply scenario alongside stable to healthy demand.
A number of naphthenic cuts and API Group III grades still remain is very short supply amid strong demand. Prices for these products are seeing upward pressure. A few sources say that bright stock values are also exceptionally firm, and could rise if spot trade emerges, although chances of surplus bright stock becoming available any time soon are slim.
Ergon announced yesterday that repairs have been completed at its 19,000 b/d Vicksburg naphthenic base oil refinery, and the company has initiated resumption of refinery operations. On Sept. 13 the plant experienced a crude-unit heater malfunction. The failure and subsequent repair caused a suspension of production from the crude unit for several weeks.
Looking upstream, crude oil futures had been mostly gaining since the beginning of the month, but on Tuesday they tumbled in accordance with lower stock indices as investors jumped out. Also dragging down crude values were higher stockpiles and China raising benchmark interest rates, analysts say.
According to industry data, crude oil inventories are perceived to have risen to the highest level in more than three months as refiners have already or are about to enter into seasonal maintenance turnaround programs.
The over-supply threatens to end a rally that had pushed futures to a five-month high at $84.43 per barrel earlier in October. Also, the U.S. dollar dipped to its lowest since January against the euro causing investors to take alternative avenues.
Industry data also revealed that refineries have been operating at an estimated 81.9 percent of capacity the first week of October, the lowest level since March, and only marginally improved to around 82.2 percent of capacity since.
In late August, ExxonMobil began planned work at its Baytown, Texas, refinery which accounts for 27 percent of the companys U.S. refining capacity. The refinery can process 584,000 barrels of crude oil a day, the most in the U.S., according to industry data.
At the close of the Tuesday, Oct. 19, NYMEX session, light sweet crude futures ended the day at $79.49 per barrel, a loss of $2.18 compared to the settlement a week earlier at $81.67/bbl.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.