Conditions in the U.S. base oils market were largely unchanged from a week ago, with no posted price initiatives noted. Following a string of increases on paraffinic posted prices which spanned from February to April, no price changes have been registered, with the exception of Flint Hills 10 cents/gal decrease on May 8 for a majority of its API Group II products. The adjustment was seen as an isolated move to align prices with other producers, and was not mimicked by other suppliers.
Demand in the heavier cuts continued to dominate, while requirements for the lighter grades was healthy but not buoyant, sellers conceded. Given that the light-vis cuts were more readily available than their heavy-vis counterparts, they were heard to be trading at deeper discounts on a spot basis. However, demand in general was deemed quite satisfactory and suppliers were reluctant to acquiesce to any large decreases for the time being.
Suppliers attributed some of the brisk activity to retail spring motor oil promotions and strong automotive sales in the United States, which has resulted in fairly balanced inventories overall. The start of the summer driving season was also expected to result in a shift of production in favor of fuels and a slight reduction in base oils output.
At least a couple of suppliers were heard to be sold out, with no extra availability to offer. Chevron was trying to build inventories following the restart of its refinery in Richmond, Calif., which had been damaged by a fire in August of last year. The supplier was expected to be in a tight position until September or October. Flint Hills was also heard to be striving to keep up with strong railcar orders.
Some attention was focused on exports to India, as a 6,000 metric tons light-vis Group II cargo was heard offered for late May loading at a lower price than a similar cargo concluded in April. There was speculation that the supplier was willing to sell at a decrease to place the cargo and alleviate inventory pressure.
At the same time, U.S. base oils prices have been considered too low to attract imports from Asia, effectively keeping the arbitrage window closed and helping maintain a more balanced supply/demand ratio and steadier pricing.
The naphthenic base oils scenario was similar to the one observed on the paraffinic side, except that participants underscored that there had not been any posted price movements since late last year, evidence that conditions were generally satisfactory amid steady demand.
In related news, benchmark U.S. crude oil futures fell from a seven-week high on speculation that supplies would prove to be sufficient, even though stockpiles decreased as predicted last week. The American Petroleum Institute was expected to release its stockpile statistics on Tuesday.
At the close of the Tuesday, May 21, CME/Nymex session, front month light sweet crude oil futures ended the day at $96.16 per barrel, a gain of $1.95/bbl from last weeks settlement at $94.21/bbl.
Brent Crude was trading at $103.80/bbl at the end of the day yesterday, up $1.20/bbl from its week-ago level of $102.60/bbl.
LLS (Light Louisiana Sweet) crude was trading at a premium of around $9.55/bbl to WTI (West Texas Intermediate) crude on May 21.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.