It was another fairly quiet week in the U.S. base oil market. Prices remain unchanged on most fronts, with no further decrease announcements trailing behind those presented in the prior week. At least one key downtime is under way, and more turnarounds are expected in the coming months.
As previously reported, Ergon, Calumet and Cross gave notice in recent weeks of naphthenic price decreases of 10 to 15 cents per gallon for most grades and as much as 18 cents for others.
However, pale oil suppliers Nynas and San Joaquin so far have remained on the sidelines and not joined in to adjust prices during this round. There are expectations by some buyers that both these producers will likely take price-cut action in November, if not sooner.
After naphthenic prices held firm for much of the year, some players have now assessed pale oil prices to be somewhere south of the $4/gal mark, at around $3.55 to $3.75/gal FOB for light and mid vis grades. For heavier vis cuts, they are pegged in the region of $3.80 to $4.10/gal FOB. Sources admit that naphthenic price levels fall within wide ranges depending on grade and end-use applications. Some downstream segments command higher prices, while others entertain lower price ideas.
In the middle of last week, HollyFrontier stepped out with an unexpected 10 cents/gal decrease off its bright stock posting. The company had dropped its bright stock posting by 20 cents/gal in mid-September, when all other bright stock producers also reduced their postings by the same amount. In that round, API Group I providers also trimmed their solvent neutrals between 10 cents and 13 cents/gal.
Still no price movements have come to light regarding Group II or III, and sources reiterated that there most likely will not be any, due to tight supply/demand conditions for premium base oils.
According to key sources, Chevrons Richmond, Calif., base oil facility embarked on a planned turnaround earlier this month. The 20,000 barrel per day plant is expected to be off line for about six weeks. Market sources also said that the company continues to enforce its longstanding Group II sales allocations.
There are a few other significant turnarounds scheduled during the first quarter, market sources said. In many cases, the downtimes are significant – at least four weeks – and most involve Group II facilities. Details are vague at this point, but they could possibly include one site in Texas, another in Louisiana, and yet one more in Canada.
Meanwhile, many producers from both the paraffinic and naphthenic sides continue to express concern over steep feedstock costs. Light Louisiana crude is pulling about a $27 per barrel premium to West Texas Intermediate, while a number of other domestic and foreign crudes are also running at high differentials over WTI or Brent crudes. Vacuum gas oil differentials have gained strength and are now weighing in at plus-$42.50/bbl over WTI for low sulfur; high-sulfur diffs are just a few dollars less.
At the close of Tuesdays Oct. 11 CME/NYMEX session, front month light sweet crude oil futures ended the day at $85.81 per barrel, a substantial gain of $10.14 from the week-earlier settlement at $75.67/bbl.
Brent crude ended the day at $110.80, gaining $10.96/bbl compared to its week-ago settlement at $99.84/bbl. LLS (Light Louisiana Sweet) crude was fetching a $27+/bbl premium to WTI on Tuesday.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.