The tempo in the U.S. base oil market slowed further this week, as August was just beginning. Buyers and sellers agree that market conditions continue to be largely balanced, although there is some supply length now being seen.
Sources say that contractual business is taking place as usual, but spot demand is thin. Meanwhile, another naphthenic producer has announced a price decrease, following the same path as Ergon, Cross and Calumet.
San Joaquin Refining told its customers that all naphthenic pale oil prices had been lowered by 25 cents per gallon this past Friday, July 27.
The annual summer vacation in Europe is commencing as August unfolds. A number of European players could be away from their businesses for upwards of a month, sources said. This action typically causes a slowdown in North America most every year.
But this year could be even tougher than most, sources say, as the economic uncertainty in Europe has most likely already stymied export activity. There are several American-based producers that ship cargoes regularly to Europe, Asia and the Middle East. These movements help keep their domestic inventory positions in good balance. But as Europe and Asia continue to struggle with a still-poor economy in many regions, some of those otherwise regular export shipments from the United States are now left to be consumed domestically. Alternatively, a few sellers may look to ship into the Mexican market, or even further down into Central and South America.
Although domestic sellers are somewhat reluctant to say that spot values have taken a nose dive due to the backup on exports, a few sources admit that it is a buyers market – at least for the time being.
Meanwhile, while paraffinic and naphthenic prices declined in July, feedstock costs have firmed once again. Producers operating costs are back to levels seen several months ago. Crude oil futures values continue to flirt with the $90 per barrel mark, although at daily closings, settlements have shied from that level, but have remained in the high $80/bbl for several weeks. Only on a few occasions did the daily CME settlements close above $90/bbl in July.
Vacuum gasoil is still deemed strong, with low sulfur values holding at a premium of $30/bbl over the benchmark WTI. Medium and high sulfur vacuum gas oil differentials are circa $26 to $29/bbl atop WTI.
At the close of the Tuesday, July 31, CME/Nymex session, front month light sweet crude oil futures ended the day at $88.06/bbl, shedding 44 cents/bbl from last weeks settlement at $88.50.
Brent crude was trading at $104.86/bbl at the end of the day yesterday, up by a modest 64 cents/bbl from its week-ago level of $104.22. LLS (Light Louisiana Sweet) crude was trading at a premium of about $17.5/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.