U.S. Base Oil Price Report

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Flint Hills Resources decreased four API Group II postings by 10 cents per gallon effective today, May 8. Otherwise, a fairly balanced supply/demand ratio and firm crude oil values continued to offer support to stable base oils prices in the United States.

Flint Hills Resources informed customers it lowered postings for its Group II 70, 75, 100 and 230 vis grades by 10 cents/gal, effective Wednesday, May 8. The company did not adjust the 600 posting, which remained unchanged at $4.47/gal.

Crude prices have reversed the downward price trend observed in late April and remain on the rise, driven by upbeat U.S. job data and mounting tensions in the Middle East on the back of Israeli air strikes in Syria.

While there is no shortage of base oils noted, some grades appear to be in tighter supply than others. A few producers said that they had received an increased number of inquiries for bright stock, which seemed to point to the fact that this cut remains tight, possibly as a carryover from a shutdown at a major production facility late last year. A second supplier conceded that it was sold out of this particular cut as well, and did not have any spot cargoes to offer.

Most of the other products seem to be in good supply, while demand has started to show some improvement over April levels, according to producers.

Meanwhile, Calumet continues to fulfill back orders, following a turnaround at its Shreveport, La., facility, which was completed in early March.

Chevron has initialized the restart process of the crude unit at its Richmond, California, refinery, which was damaged by a fire in August 2012. Once the crude unit attains full capacity, the supplier will be able to increase rates at its Group II base oils facility.

On the naphthenics side, prices are holding at steady levels, with no price initiatives noted since November of last year.

Spot activity is not particularly robust in any of the base oils segments, as most consumers are able to cover requirements through term contracts. Some spot deals are heard to be taking place at minimal discounts from posted prices, but buyers hopes of achieving more significant reductions are met with resistance from suppliers.

Paraffinic price ideas (incorporating both spot offers and contract prices) are currently discussed in a range of $3.22/gal to $3.32/gal FOB for API Group I light vis cuts. Mid vis base oils are heard at around $3.40/gal to $3.58/gal FOB, although some suppliers place the high end of the spread at around $3.55/gal FOB. Price indications for heavy vis cuts are pegged within a range of $3.90/gal to $4/gal FOB, with some selling ideas also mentioned at $4.50/gal FOB. Bright stock prices are largely discussed at $3.95-4.22/gal, although higher prices have also cropped up on account of the snug conditions of this cut.

Regarding Group II, prices are assessed at similar levels to those in Group I, with light vis cuts quoted at around $3.24-3.35/gal FOB, mid vis cuts at $3.42-3.62/gal FOB and heavy vis grades at $4-4.22/gal FOB. Price ideas may vary depending on the supplier, product and quantities.

Pale oil values are assessed at $3.54-3.71/gal FOB for 100 to 750 vis cuts and for general purpose applications. The 60 vis cut, used mostly in the manufacture of transformer oil, is heard at around $3.90-4/gal FOB, with healthy demand noted. Heavy pale oil prices were hovering at similar levels as the transformer oil grade in the high $3s/gal. Specialty pale oils and other niche applications continue to command premiums from 50 cents/gal to $1/gal over mainstream applications.

Export movements have been subdued because of weak demand in Europe and Asia, coupled with low price ideas. Sporadic inquiries for combined cargoes of two or three base oils grades have emerged, but traders have encountered difficulties in putting these types of cargoes together, because some of the requested cuts are not readily available.

On the shipping front, details of a combination cargo of 8,300 metric tons lubes and 10,000 tons paraxylene fixed from Houston to Singapore and Ningbo have emerged. The cargo is heard to have fetched a freight rate of $65/t for late April lifting. A second 7,000 ton parcel from the Gulf Coast to Brazil was concluded at $56/t, also for end April loading. An inquiry to move a prompt 2,000 tons of lubes from Europe to Houston was noted.

In other news, on Tuesday, May 7, the Dow Jones Industrial Average closed at a historic level of over 15,000 points on the back of positive employment data. Both the Dow Jones and Standard and Poor’s 500 have now reached historic highs at several points within the past few months. Stocks were also pushed higher by better-than-expected data coming out of Germany, a surprise decision to lower interest rates in Australia, and a stellar day in Japan where the Nikkei climbed 3.6 percent.

Looking upstream, vacuum gas oil continues to draw a premium over West Texas Intermediate crude, although somewhat softer than the past few months. Low-sulfur VGO differentials are now hovering at around $16/bbl over WTI. For much of April, VGO premiums averaged in the mid to high $20s/bbl over WTI.

At the close of the Tuesday, May 7, CME/Nymex session, front month light sweet crude oil futures ended the day at $95.62 per barrel, a gain of $2.16/bbl from last weeks settlement at $93.46.

Brent Crude was trading at $104.40/bbl at the end of the day yesterday, up modestly by 75 cents/bbl from its week-ago level of $103.65.

LLS (Light Louisiana Sweet) crude was trading at a premium of $11/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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