U.S. base oil activity was fairly low key this past week, as many participants enjoyed a long weekend break while celebrating the Presidents Day holiday. Producers appear to be sizing up the supply/demand situation while contemplating improving margins going forward. Buyers, meanwhile, are showing enhanced interest for various base stocks as the spring season nears.
On the paraffinic side, despite sluggish demand for a number of grades earlier this year, producers said that business is resuming a more normal pace and should continue to increase in the coming few months.
A few sellers said that interest for heavy-vis and bright stock continues to outstrip that for the lighter ends. But overall, the near-term outlook is much improved and even better than expected in many cases.
In fact, most suppliers said they have low inventories of heavy vis neutrals as well as scant bright stock availability, and therefore are not pursuing spot opportunities. Several other sellers added that they will likely remain in sold-out positions of bright stock through May-June.
Paraffinic price ideas are holding steady following a round of price hikes pushed through in mid-January. Furthermore, sources said that temporary voluntary allowances (TVAs) or any other incentive programs are rare, as most producers removed them from the bargaining table weeks ago.
Sources also said that naphthenic price ideas are firm on increased demand and decreased inventory for many pale oils. Producers gladly reported that sales into the metalworking and process oils segments have shown remarkable improvement from a year ago, although overall volumes remain well below those sold in the early 2000s.
Several suppliers were also pleased to say that the Group III arena is showing a build in consumer requirements, with customers seeking an array of top-quality neutrals. Prices are holding at a premium to Group I and II/II+ paraffinics in most situations, although there have been some cases where Group III prices have had to be competitive.
After nearly two weeks of downtime due to an explosion on Feb. 5 at Calumets 11,900-barrel-per-day paraffinic lube plant in Shreveport, La., the company advised it is in a position to resume running on Feb. 18. Calumet said that it will take several days to line out the unit, but expects to be producing product by Monday, Feb. 22. Inventories are currently depleted and the company will use the first runs to catch up on back orders of all grades.
Looking upstream, crude oil has traded between $69 per barrel and $84/bbl for the last few months as investors struggle to gauge global crude demand.
Earlier this week, Japan said its economy grew an annualized 4.6 percent in the fourth quarter, while China raised its reserve requirements for banks last week in a bid to slow economic growth and to avoid asset bubbles.
Meanwhile, crude oil values gained upward momentum on a weaker U.S. dollar, which fell against the euro, pound and yen. The euro gained ground on restored confidence as Europe urged Greece to take measures to tackle its debt crisis. Finance ministers met recently in Brussels, Belgium, to discuss the problem.
At the close of the Tuesday, Feb. 16, NYMEX session, light sweet crude futures ended at $77.01 per barrel, a sizeable gain of $3.26/bbl compared to the week-earlier settlement at $73.75.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.