Following the path of other naphthenic producers, Nynas announced a 35 cents per gallon increase for its lineup. Although sources anticipate some paraffinics price action, there was still no movement.
Nynas said it would raise its pale oils by 35 cents/gal effective Thursday, March 15. Recapping other moves, on Friday, March 2, San Joaquin Refining increased naphthenic base stocks between 20 cents and 25 cents/gal. On Wednesday, March 7, Calumet raised its pale oils by 25 cents/gal across the board. Cross Oil, on Friday, March 9, initiated increases between 25 cents/gal and 35 cents/gal. Ergon lifted all of its pale oils by 28 cents/gal increase on Monday, March 12.
Sources are still somewhat bemused that no paraffinic prices have moved given ever-rising upstream costs and the subsequent impact on base oils production. A few buyers hinted that stagnant posted pricing could be attributed to excess availability of certain grades.
Many participants surmise that overall demand within the API Group I/II/III categories is a mixed bag. Some say market activity this year has fallen short of expectations, while others see demand as largely steady. However, sources were quick to point out that some downstream segments are doing very well and are meeting, or surpassing, suppliers’ forecasts. Nevertheless, paraffinic postings have not budged since decreases were issued last December.
Perhaps the more surprising market feature during the past several months has been the strong demand detected for a variety of naphthenic cuts. Much of the tightness is because of three outages planned for February through April. But sources contend that even though inventory positions were (or will be, when possible) built-up in advance of these downtimes, demand has proven to be better than expected.
Following the recent round of increases, pale oil values have increased well into the $4/gal range. Various sources peg 2000 pale within a spread of $4.25/gal to $4.50/gal. Light vis grades encompassing 60 pale to 200 pale have been assessed around $4.10/gal to $4.30/gal, while mid and heavier cuts were similar at $4.08/gal to $4.32/gal. In all cases, there is some contract and ongoing business being concluded below and above these ranges. Sources also say that business into Mexico is being transacted closer to the low to mid points of these assessments.
Domestic and foreign crude oils, as well as vacuum gas oil values, have been on a firming trend this year. Perhaps even more off-putting to the base oils arena is that energy experts anticipate crude and VGO values will continue to firm going forward. Various global refineries may completely shut down, and producers may take crude units or FCC units offline for extended periods due to poor economics. This could support stiffer crude/VGO numbers.
In the U.S., sources report a 230,000 b/d crude unit at ExxonMobil’s 344,500 b/d Beaumont, Texas, refinery was heading into a turnaround this month that was originally slated for 2013. ExxonMobil is not alone, as other Gulf Coast refineries report doing the same thing.
As a result of these events, low sulfur VGO prices shot higher to a $31 to 32/bbl over WTI, increasing the premium by several dollars over the past few weeks. Some traders see the potential for VGO values to inch even higher.
At the close of the Tuesday, March 13, CME/Nymex session, front month light sweet crude oil futures ended the day at $106.71 per barrel, rebounding by $2.01/bbl from last weeks settlement at $104.70.
Brent crude was trading at $126.32/bbl at the end of yesterday, up $4.22/bbl from its week-ago level at $122.10. LLS (Light Louisiana Sweet) crude was trading at a premium of about $20 to 21/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.