U.S. base oil market conditions changed little from the past several weeks. Most players are still in agreement that activity is steadily picking up steam in advance of the spring fling. Suppliers’ projected sales for March through April are more substantial compared to even January through February (so far), which in itself was an impressive improvement over Q4 volumes, they pointed out.
Although generally balanced to tight across the board, the API Group II sector continues to cope with some of the more difficult supply conditions – largely due to a rash of planned turnarounds. Some of the planned outages have just completed, while others are underway with a few others to commence in the coming weeks.
Meanwhile, Group III grades are also more to the tight side, although suppliers say that contract customers are receiving their scheduled volumes. There have been instances whereby a few consumers have sought additional Group III quantities, but with limited success due to the extremely balanced supply/demand fundamentals within this premium base oils category.
It was reported recently that several cargoes of Group II and possibly III cuts have made their way into the domestic market. U.S. buyers that have acquired these volumes would not reveal the landed price, but they indicated that the price worked out to be a little below contract.
Contract price ideas have been described as stable to firm, with Group I 100 vis grades pegged in a range of $3.65 to $3.78 per gallon FOB. Some players agree that bright stock numbers are around the $4.85/gal to $5.05/gal FOB region. Group II light vis cuts are gauged around $4.20/gal to $4.35/gal, while heavy vis Group II neutrals rest near $5/gal to $5.25/gal FOB. Group III base stocks are assessed in the high $5s to low $6s/gal FOB spectrum.
Sources note that although the above spreads are all largely representative of the average-sized contract buyer, there are prices being concluded outside these perimeters-some contracts are done above and others below these aforementioned assessments.
Producers contend that operating costs are continuing on an upward path, with benchmark WTI prices now pushing over the $100/bbl mark, a level not seen in about a month. They point out that vacuum gas oil values have once again been running at a stiff premium to WTI, at $28.5 to $30/bbl for low sulfur VGO. Some producers also reiterated that benchmark Brent crude is also trekking higher the past few days resulting in a number of domestic crude types, such as Light Louisiana Sweet, to tick upward as well.
At the close of the Tuesday, Feb. 14, CME/Nymex session, front month light sweet crude oil futures ended the day at $100.74/bbl, up $2.33/bbl from last weeks settlement at $98.41.
Brent crude was trading at $ 117.44/bbl at the end of the day yesterday, up $1.35/bbl from its week-ago level at $116.09. LLS (Light Louisiana Sweet) crude was trading at a premium of about $20/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.