The U.S. base oil market appears to be in a holding pattern, with little change noted in buying or supply during the past week. Posted prices are unchanged, but spot prices are described as becoming buyer-friendly, depending on volume and grade.
There were two refinery fires in recent days, but both disruptions are thought to have been contained on the refining side. Details of the fires at Chevron Richmond Refinery in California and HollyFrontier Refinery in Tulsa, Okla. are reported elsewhere in Lube Report.
Some sources said there are patches of tightness for certain base oils, while lengths of other grades are increasingly available. Buyers suggest that there are a few aggressive sellers offering steeper discounts on a spot basis. However, a good deal depends on volumes sought and what paraffinic or naphthenic base stocks are required, they added.
In some cases, heavy grades are easier to source than a few months ago. This could be due to the rubber industry, industrial and marine sectors slowing down the past month.
Sources also pointed to European buyers taking less product in recent months from U.S. suppliers as a key factor in a backup of surplus in the domestic market. Most of the drop-off has been blamed on the ongoing economic woes in Europe. But more recently, the usual summer holiday period is in full swing across the European continent.
Meanwhile, several market watchers have speculated that in an effort to keep supply/demand in better balance, a number of large refineries may be running below capacity, perhaps as low as 75 to 85 percent.
Apart from the recent falloff in demand, other concerns are brewing now that crude values have spiked once again over the $90 per barrel mark. Even though base oil producers lowered posted prices about a month ago, operating costs have since steadily increased. Some market observers believe that suppliers could attempt to raise base oils prices in the coming weeks, particularly if upstream costs continue to rise and also before the fall buying season sets in.
Vacuum gasoil values have strengthened over the past week, with differentials up about a dollar. Low sulfur VGO is now assessed at a premium of about $31.5/bbl over the benchmark WTI. Medium and high sulfur VGO differentials are circa $27/bbl to $30/bbl atop WTI.
At the close of the Tuesday, Aug. 7, CME/Nymex session, front month light sweet crude oil futures ended the day at $93.67/barrel, up $5.61/bbl from last weeks settlement at $88.06.
Brent Crude was trading at $111.94/bbl at the end of the day yesterday, up by $7.08/bbl from its week-ago level of $104.86. LLS (Light Louisiana Sweet) crude was trading at a premium of about $18/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.