With tight supply against strong demand, tense fundamentals prevail in the U.S. base oil market.
Overall activity was described as fairly quiet this week. Consumers are slowly absorbing the impact of the recent round of price hikes put forth by both paraffinic and naphthenic producers. Increases ranged from 30 cents per gallon to 60 cents per gallon.
Base oil producers continue to keep a close eye on upstream developments as crude soared to a fresh high over $113 per barrel during intra-day NYMEX trade earlier this week. And stiff vacuum gas oil values, currently assessed at a premium of circa $22 to $25/bbl to WTI, remain a constant concern to producers. Gasoline and natural gas values also have shot up to new highs, trailing skyrocketing crude values.
Several onlookers indicated that upward pressure on prices may continue to build, particularly if crude values are sustained at the $111 to $113/bbl level.
Overall base oil demand remains very strong for most end-use segments. In virtually all cases, customer orders are better than expected, and it is rare when direct buyers sales dip below levels achieved during the past few months, a few sellers noted.
Most sellers concur that spot trade is scant although demand for spot material is high. It was understood that any supplier that pitches a spot offer is doing so at posting-plus, in hopes of driving away buying interest.
In related market news, an explosion and fire ripped through Petroleos Mexicanos 245,000 barrel-per-day Salamanca refinery this past Sunday, damaging the dewaxing equipment. According to local reports, flames reached about 100 feet high. See this weeks separate story.
At the close of the Tuesday, April 26, NYMEX session, light sweet crude futures ended at $112.21 per barrel, a sizeable gain of $4.06 compared to the week-earlier settlement at $108.15/bbl.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.