The U.S. base oils market is lackluster overall, and there appears to be mounting downward price pressure on all postings, despite some tightness in certain grades and rising crude oil values. A small fire erupted Monday at Chevrons Richmond, Calif., plant, fortunately with limited consequences.
Several suppliers continue to say that demand remains healthy for API Group II and III. They admit, however, that demand has slowed somewhat during the past month or so from the extremely strong levels of buying interest earlier this year.
Some players contend that customer buying is steady despite the season. A slowdown typically transpires around this time of year, and suppliers tend to get a bit nervous if inventories are high.
In some cases there is an overhang of certain grades, but this surplus can be found mainly in the Group I sector, while Group II/III sectors are in better balance. This is not to say that a buyer cannot find some spot availability of the premium grades; a few consumers have secured additional volumes recently.
Given widening price discrepancies among the three key global regions, a large domestic buyer has taken advantage by importing a cargo of approximately 6,000 metric tons of Group II from Asia at a substantial discount to current U.S. offers.
Buyers pointed out that prices in Europe and Asia have dropped in the past few months, allowing some consumers to take advantage of the arbitrage.
Sources said a large global base oils producer has reduced its Asian prices again. This is apparently the third round of price cuts in recent months in Asia, compared to only two rounds of discounts in the U.S. for Group I grades.
Buy-side sources are increasingly dissatisfied with current U.S. postings. They believe todays Group II and III postings are not justified, and should follow the recent pattern of lower Group I prices.
On a different note, Chevron said that it experienced a small fire at its Richmond, Calif., refinery on Monday, Nov. 14. The refinery had been taken offline for a planned 45-day turnaround in early October and was in the process of being restarted when the fire erupted.
The company yesterday said, We experienced a small fire which has been contained and extinguished. One worker was treated for minor injuries and has returned to work. There is no impact on the community or risk to the environment. We continue to supply products to our customers without interruption.
Looking upstream, crude oil futures have gained upward momentum over the past several weeks, nearing $100 per barrel, a level that a number of energy analysts predicted some months back.
Industry experts attribute rising crude values to more positive reports about the U.S. economy. Domestic consumer spending has risen for five months straight since June. As well, cheaper gasoline prices in recent months have helped boost consumer confidence despite the climb in crude values, analysts said.
At the close of the Tuesday, Nov. 16, CME/Nymex session, front month light sweet crude oil futures ended the day at $99.37 per barrel, a gain of $2.57 from last weeks settlement at $96.80.
Brent crude was trading at $112.53/bbl at the end of the day yesterday, down $2.69/bbl from its week-ago level at $115.22. LLS (Light Louisiana Sweet) crude was trading at a premium of about $14/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.