U.S. base oil activity is fairly sluggish so far this month, although a few players see pockets of healthy demand. Following a full round of API Group I price decreases in recent weeks, no other posted price adjustments have emerged.
Despite volatility caused by the European debt crisis during the past year, some sources said that global base oil demand managed to remain buoyant. The unstable financial situation has most certainly impacted a multitude of businesses, but the base oil industry appeared to maintain a steady pace throughout. Only recently has a slowdown across the board for both paraffinics and naphthenics been detected, suppliers lament.
Strong demand from Group II and III customers has kept these sectors balanced to tight all year, and they will likely remain fundamentally sound for months to come, sources suggested. Most suppliers of these premium grades contend that there have been limited to no surplus volumes this year, although in most cases, all contract obligations have been satisfied.
Spot trade in the Group I and naphthenic segments, however, was not as stable, and activity has decelerated in the past month or so, applying downward pressure on prices. Subsequently, most suppliers lowered offers on solvent neutrals and pale oils, as demand trailed off.
San Joaquin Refining did not follow when other naphthenic producers dropped prices in early-to-mid October, but some players expect that San Joaquin will make a downward adjustment soon. It is worth mentioning that West Coast demand for all base stocks – paraffinic and naphthenic – has been exceptionally strong for months while availability has been extremely snug.
And just as the market does appear to be generally slowing, crude oil values have zipped back up to levels not seen in about three months at over $96 per barrel for WTI. In spite of stiffer crude oil values, other feedstock costs have not retreated as they often do when crude values blow out.
Vacuum gas oil, a key feedstock, is weighing in with differentials at plus $28 to $30/bbl to WTI for low sulfur, or $124 to $126/bbl, while heavy sulfur VGO is running about $2/bbl lower.
Light Louisiana sweet crude remains at about $20 to $21/bbl over WTI, and Brent crude values have stretched out to over $115/bbl.
At the close of the Tuesday, Nov. 8, CME/Nymex session, front month light sweet crude oil futures ended the day at $96.80 per barrel, a gain of $4.61 from last weeks settlement at $92.19.
Brent crude was trading at $115.22/bbl at the end of the day yesterday, up $6/bbl from its week-ago level at $109.22. Light Louisiana sweet crude was trading at a premium of about $20.50/bbl 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.