U.S. Base Oil Price Report

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Concerns over a slowdown in base oil demand in the U.S.appeared to have been dispelled – at least for the time being – by a pick-up inrequirements as a result of buyer efforts to stock up on product in the eventof severe storms or hurricanes in the U.S. Gulf, which could lead to supply disruptions.

Suppliers reported that orders had been fairly steady in the domestic market this week, with interest for the heavy vis cuts continuing to prevail over the lighter cuts.

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Nevertheless, some suppliers conceded that activity in a few pockets of the market had been more subdued than in May, and expected demand to start tapering off as the market slips into summer mode.

While supply/demand is characterized as generally balanced, a couple of producers appeared to be in tight supply positions. One of them was Motiva, with sources reporting that the producer had been able to meet contractual commitments, but had little additional availabilities to offer. There was some talk about possible production problems at Motivas base oils plants in Port Arthur, Texas, but industry sources said that the producer was running its facilities at normal rates. A minor production hiccup had occurred about a month ago, but it was quickly resolved and it had not had a significant impact on base oils production, sources added.

At the same time, Chevron has been building API Group II inventories thanks to the restart of its operations in Richmond, Calif., following a fire that damaged the refinery in August 2012.

Domestic demand has not shown much fluctuation, but a good number of inquiries for exports have surfaced, especially from Latin America, participants said. Export opportunities into Europe or Asia do not seem to be so prolific, as numbers are not workable at the moment, sources added.

A couple of inquiries were spotted on the freight market, with a 4,000-4,500 metric ton cargo being discussed to cover Paulsboro-Colombia and Peru in June. A smaller 2,500 ton cargo was expected to be shipped from Houston to Varna in second half June as well.

Paraffinic postings remained unchanged.

On the naphthenic front, prices were also largely unchanged, with healthy demand and firm feedstock prices prompting suppliers to keep base oil values at stable levels.

Upstream, WTI (West Texas Intermediate) crude traded near the highest price in more than four months ahead of a U.S. Energy Information Administration report that was expected to show U.S. stockpiles dwindled as refinery processing increased. Fresh signs of a U.S. economic recovery may bolster fuel demand as well.

At the close of the Tuesday, June 18, CME/Nymex session, front month light sweet crude oil futures ended the day at $98.44 per barrel, $3.06/bbl up from last weeks settlement at $95.38/bbl.

Brent Crude was trading at $106.02/bbl at the end of the day yesterday, up $3.06/bbl from $102.96/bbl a week ago.

LLS (Light Louisiana Sweet) crude was trading at a premium of $8/bbl to WTI on June 18, the lowest premium in more than two years.

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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