The U.S. base oil market appears to be in a holding pattern, with little change noted in buying or supply matters in the past several weeks. The long Memorial Day weekend was also blamed for helping keep the market quiet as many participants have begun their summer vacations.
A couple of sources speculate that to keep the supply/demand fundamentals balanced, a number of base oil production sites may be running below capacity, perhaps circa 80 percent of optimum rates. Producers are not commenting on these speculations, but rather point out that their customers are receiving scheduled requirements and without delay in most cases.
The one exception is that Motiva remains on a 50 percent sales allocation (announced last week) for its API Group II Star 6 220 vis cut. The company will continue sales restrictions until the Port Arthur, Texas facility is back online after its May 12 fire. Some players anticipate that the impaired lubes train could be up and running within the next few weeks.
Although buying interest peaked in April and throughout much of May, demand has fallen quiet once again. Some of the lack of activity can be attributed to the prevailing economic woes in Europe along with U.S. demand slowing ahead of the summer holiday season. It is surmised – at least in the United States – that global consumers have built up their stock positions to satisfy their businesses for the next few months.
Meanwhile, traders claim that finding large slugs of certain grades such as heavy-vis cuts (paraffinic or naphthenic) is still a bit tricky. Some of the same spot buyers have suggested that light viscosity neutrals are perhaps more readily available, depending on specific grade and supplier. It was also noted that there are limited confirmed spot trades being concluded, sources said.
At the close of the Tuesday, May 29, CME/Nymex session, front month light sweet crude oil futures ended the day at $90.76 per barrel, a loss of 90 cents/bbl from last weeks settlement at $91.66.
Brent crude was trading at $106.60/bbl at the end of the day yesterday, easing $1.62/bbl from its week-ago level at $108.22. LLS (Light Louisiana Sweet) crude was trading at a premium of about $11.85/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.