U.S. Base Oil Price Report

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The U.S. base oils market remained mostly quiet following the Thanksgiving holiday. Some players continue to assess the recent price decreases both in the paraffinic and naphthenic sectors. Both sides agree that prices have dipped, but the question to some potential buyers is how much lower sellers are willing to drop them.

Sources implied that buyers are simply testing the water in hopes of finding exceptionally low offers, but most suppliers are unwilling to discount spot numbers much more than from where they already stand.

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To recap, several participants placed API Group I contract prices in a band of $3.40 per gallon to $4.10/gal for a spectrum of grades. Group II contract prices are similar and are pegged in a range of $3.55/gal to $4.45/gal on an FOB basis.

Spot values for an array of paraffinic grades are thought to be only modestly lower than those referenced above.

Naphthenic prices remain in a wide range as well, with some players placing pale oils at circa $3.25/gal to $3.90/gal, depending on application and volumes purchased. Again, suppliers mentioned there is regular ongoing business that may fall below or above the aforementioned span of price ideas for 60 vis up to 1200 vis.

For the most part, players have opted for the sidelines, most likely sizing up the price and supply situations while taking a wait-and-see stance. Both camps are seemingly contemplating which side might be the first to make a fresh move. Or will the current lackluster activity be sustained through the end of this year, some participants pondered.

While demand continues to dissipate, inventories for both buyers and suppliers are nearing high levels in some situations, industry sources said. Some buyers (finished lubricants/blenders/packagers) have been buying smaller amounts of base oils over the past few months to keep their stocks balanced, while facing some uncertainties of how the downstream will perform in the coming months. As well, it was understood that some producers are operating their facilities at reduced rates to keep supply/demand fundamentals better balanced.

There could be some strong signs of an economic recovery emerging with the recent better-than-expected outcome of Black Friday and Cyber Monday shopping. Both events surpassed analysts expectations. Also, the housing market is showing strong signs of recovery.

At the close of the Tuesday, Nov. 27, CME/Nymex session, front month light sweet crude oil futures ended the day at $87.18/barrel, a small gain of 43 cents/bbl from last weeks settlement at $86.75.

Brent Crude was trading at $109.82/bbl at the end of the day yesterday, slipping 16 cents/bbl from its week-ago level of $109.98. LLS (Light Louisiana Sweet) crude was trading at a premium of about $21.75/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.

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