U.S. Base Oil Price Report


U.S. base oil sources say that market activity is on target for late February, with some customer orders showing a sizeable pickup in volumes this week, while other buyers are still dragging behind. But optimism prevails that all consumers requirements will be up to speed by early April.

Most participants agree that supply is tight for the heavier-end cuts, such as 600 vis and bright stock, alongside strong demand. Light grades, particularly 200 vis to 275 vis cuts, remain readily available for large parcels amid questionable demand.

In an effort to keep the U.S. market in better balance, its believed that a few producers are shipping surplus quantities of light-to-mid vis neutrals offshore. These are thought to be either intra-company shipments (to producers affiliates), or the receivers may be spot buyers in South America, Africa or Asia taking the product at discounted prices.

Contract domestic buyers concur that January price hikes initiated by all paraffinic producers were holding firm, and there was little wiggle room to negotiate prices lower for any grade, apart from the usual volume discounts.

A number of base oil suppliers continue to beef up stocks in advance of the upcoming spring buying season, which appears to be in its early stages already. This could be the main reason for the thin spot activity seen in recent weeks and also for the firmer price ideas in the domestic arena.

Meanwhile, upstream indicators continue to baffle energy experts. Mixed signals that the global economy is or is not recovering have led to more difficult predictions of how much crude oil might be consumed in 2010, analysts lamented.

Some good news this week was the fact that home prices rose for the seventh straight month in December. This is a sign of price stability, although the U.S. housing market continues its bumpy road to recovery.

The Standard & Poor’s/Case-Shiller 20-city home price index released on Tuesday rose 0.3 percent from November to December, to a seasonally adjusted reading of 145.87. The index was off 3.1 percent from December last year, nearly matching analysts’ estimates that it would fall by 3.2 percent.

Looking upstream, the three-week run in crude oil values which had pushed the crude price back above $80 per barrel took a breather Tuesday.

In recent months, crude prices had bottomed at near $69/bbl in mid-December, but since then they have bounced between $70 and $80/bbl in a tug-of-war between investors who believe an economic recovery and demand from China will pull prices higher and those who think soft demand in the U.S. will keep prices low.

Along the same lines, there has been a drop in consumer confidence, according to the Conference Board. On Tuesday, it said its consumer confidence index fell to 46 in February from 56.5 last month. That was well below the forecast of economists polled by Thomson Reuters; they had expected a reading of 55.

Not only did the index fall sharply, it is far from indicating strength in the economy. A reading above 90 means the economy is on solid footing. Consumers are vital to a strong, sustained economic recovery because their spending accounts for more than two-thirds of all economic activity, analysts explain.

The confidence numbers came as investors were already rethinking the more optimistic assessment they had of the economy last week. Stocks had rallied for four straight days on upbeat earnings news, including some from retailers, and on improving housing and manufacturing numbers.

The Conference Board findings caused the stock market to take a dip on Tuesday. The Dow Jones industrials were off more than 90 points. Interest rates also fell as investors moved money out of stocks and into the safety of Treasuries.

Posted prices are unchanged this week.

At the close of the Tuesday, Feb. 23, NYMEX session, front month light sweet crude oil futures ended the day at $78.86 per barrel, a gain of $1.85 from the Feb. 16 settlement at $77.01/bbl. During intra-day trade, futures prices reached a high of $80.39 before recoiling to the $78.22/bbl mark reached as the low.

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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