U.S. Base Oil Price Report


Motiva initiated a sales allocation program, and other producers kept a close watch on their sales, as the overall supply situation remains extremely tight amid strong demand.

During the past week, Motiva, the largest U.S. producer of API Group II/II+ base stocks, told its customers they would be limited to 80 percent of their historical volumes of Star 6 and to 110 percent of Star 5+. The company said it was not certain how long the sales allocation program would have to be in effect. Motiva also said all its other Star neutral grades are very tight due to the ongoing strong buying trend.

Early this year Motiva experienced production difficulties at its Port Arthur, Texas, refinery. These issues were rectified well over a month ago, sources noted. The producer is also in preparatory stages of a planned turnaround on one of its three units, which is to commence in late May.

Other producers have also said that their inventory positions are very low, and it has been extremely difficult to build stocks due to a fierce uptake in demand. Improved buying began to build steam mid-2010 while also recovering from the slow year in 2009, sellers added.

Current market fundamentals are unfortunate for buyers seeking additional volumes, since most sellers are operating with constrained supply.

Exports of both paraffinic and naphthenic oils have slowed considerably as well due to scant availability of surplus barrels, traders lament. So far, spot transactions have been negligible for much of this year. (The slowdown in exports does not include regular ongoing and contract shipments.)

However, there could be an alteration in base stocks availability following the catastrophic, horrific events still unfolding in Japan, sources observed. Japan was a significant consumer of various petroleum products until the earthquake and tsunami hit late last week. Demand from that region is expected to falter for the immediate future, and this could have an impact on the U.S. and European supply situations, although the extent remains unclear for now.

Since the terrible tragedy happened in Japan, crude oil prices took a nose dive. They have slipped several U.S. dollars from Fridays level and about seven to eight dollars from the week-ago settlement. Despite this fall in crude prices, upstream costs continue to be a key concern for base oils producers.

Crude oil values are still higher than they were in mid-February when uprisings in Libya shut down that country’s oil production. At that time, futures rose from around $85 per barrel to more than $105/bbl last week, reaching the highest level since September 2008.

Paraffinic base oil posted prices were pushed 30 to 70 cents per gallon higher in late February, while naphthenic cuts were raised 30 to 40 cents/gal more recently. Despite these recent hikes, producers say that profit margins are suffering.

At the close of the Tuesday, March 15, NYMEX session, light sweet crude futures ended the day at $97.18 per barrel, shedding $7.84 from the week earlier settlement at $105.02/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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