U.S. Base Oil Price Report

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Despite an almost imperceptible slowdown in demand brought on by the arrival of the summer season, buyers said that suppliers were not granting discounts above 5 to 8 percent over posted prices because business was still fairly brisk in the U.S. base oils market.

Following the slight downward adjustment introduced by Phillips 66 on two API Group II postings a week ago, no other price revisions emerged. Market observers said that producers were doing their utmost to maintain prices at reasonable levels and were hoping to improve margins, which have been under pressure since late last year.

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Participants underscored that the high-vis grades were still snug, with API Group II 600N in tight supply because of the extended shutdown at the Chevron refinery in Richmond, Calif., following a fire in August 2012. However, there were reports that the base oils units had restarted and the producer was building inventories.

Bright stock was still stealing the spotlight, with several inquiries heard for this cut. A deal was reported sealed within a $4.08-$4.12/gal range this week.

The mid-vis grades were fairly balanced against demand, while the light grades such as 100N were showing some length, but it was nothing out of the ordinary, according to suppliers. A buyer said that the only spot offers seen in the market were for 100N cargoes, which proved that the lighter cuts were tilting towards oversupply conditions.

Nevertheless, a majority of producers appeared fairly satisfied with sales volumes registered so far in June, with some sellers expecting an uptick in orders as consumers start to pad inventories as part of a hurricane contingency plan. Orders for late June/early July have increased as customers have started to stock warehouses with packaged goods to prepare for possible severe weather, a seller said.

On the naphthenic front, no fresh initiatives were disclosed, with volumes moving at or above expectations, lending support to stable price ideas.

At the close of the Tuesday, June 11, CME/Nymex session, front month light sweet crude oil futures ended the day at $95.38 per barrel, $2.07/bbl up from last weeks settlement at $93.31/bbl.

Brent Crude was trading at $102.96/bbl at the end of the day yesterday, down 29 cents/bbl from $103.25/bbl a week ago.

LLS (Light Louisiana Sweet) crude was trading at a premium of around $9.25/bbl to WTI (West Texas Intermediate) crude on June 10.

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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