Summer doldrums took a firmer grip of the U.S. market this week. Although overall demand is deemed healthy, sources said it is not as robust as seen in months past. Meanwhile, supply availability is still generally tight, but this quiet spell is allowing producers to boost their inventories.
And the timing could not be better for this opportunity, as the threat of hurricane season is underway, players pointed out. Producers have about another month to beef up stocks before the period of greatest historic storm activity hits, the period between later August and early October.
U.S. government forecasters have said they expect three to six major hurricanes, which would make 2011 an above average Atlantic storm season. No major hurricanes have made U.S. landfall in the past five years, but the forecasters warn U.S. coastal residents that they can’t count on a sixth straight year without a major landfall on either the Atlantic or Gulf coasts.
As many as 18 named tropical storms may develop during the six-month Atlantic hurricane season that began June 1, according to forecasters at the National Oceanic and Atmospheric Administration. They further speculated that three to six could become major hurricanes, with maximum winds of over 110 miles per hour or higher.
No major hurricane has made a U.S. landfall since Category 3 Hurricane Wilma struck Florida in 2005, though Hurricane Ike caused extensive damage in September 2008 when it roared ashore in Galveston, Texas, as a strong Category 2 storm with top winds around 109 mph. Ike caused $10 billion in damage in Texas, Louisiana and Arkansas, making it the third-costliest storm after Hurricanes Katrina in 2005 and Andrew in 1992, according to the National Hurricane Center. Scientists reiterated coastal residents can’t expect their luck to hold.
As the storm season approaches, base oil producers are working hard to have enough material to satisfy their customers requirements in the coming months, through hurricane season and as demand picks up speed.
Buyers say that API Group II and III cuts remain the tightest of all categories. To some degree various light and mid vis solvent neutrals are also difficult to source. Buyers add that chances of finding surplus volumes of heavy vis and/or bright stock are probably even slimmer.
Traders seeking large parcels are still having a difficult time in securing large volumes of base oils, sources say. And domestic buyers wanting additional barrels are also finding it an arduous task, as most suppliers are tapped out on many grades.
Current base oil price ideas are holding firm because of the generally tight supply scene, with no downward price pressure seen in the market, say sellers.
Crude oil values appear to be on the run once again, topping $100 per barrel during futures day trading the past several sessions, although closing just below that level in each case.
At the close of the Tuesday, July 26, NYMEX session, light sweet crude futures ended the day at $99.59 per barrel, a gain of $2.09 compared to the settlement a week earlier at $97.50/bbl.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.