U.S. Base Oil Price Report


Many U.S. base oil buyers will see the recently announced increases implemented in September, as a good number enjoy a schedule which grants price protection for a month from the effective dates, which range from July 26 to Aug. 23.

Some suppliers expressed concern that the increases would discourage consumers from placing orders in September, but others said that they expected demand to change little from August, which was considered a very good month overall. However, some players pointed out that orders had been fairly strong in August because many customers wanted to beat the increase implementation dates.

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Paraffinic base oil producers had announced increases between 5 and 25 cents per gallon, depending on the producer and the grade, on the back of escalating crude oil and vacuum gas oil values. Similarly, naphthenic suppliers lifted prices by 15 to 20 cents/gal.

A couple of sellers acknowledged that requests for spot cargoes had dwindled and that some customers, particularly in Mexico, were hoping to be able to finalize transactions at pre-increase prices, but suppliers were standing firm by their offers. Mexican buyers were expected to hold off on purchases as long as possible because the local currency, the peso, has weakened.

This week, activity in the U.S. was largely subdued on account of the Labor Day holiday weekend, but business was anticipated to pick up again in the coming weeks. A supplier explained that some consumers follow a standard procedure of placing all their orders for the month at one time to start the new month, and just stick to that format, regardless of the price movements.

Sellers said the increases were likely to face little resistance, given that buyers were aware of the climb in crude oil and feedstock prices, but conceded that this factor was imbuing the market with some nervousness.

Pale oil market participants commented that since one of the producers had announced a price increase later than the rest of the suppliers within the same segment, buyers had used this delay as an excuse to keep prices at previous levels. When the outstanding supplier eventually stepped out with a similar adjustment, the increase implementation was more readily accepted, sources explained.

As far as production is concerned, Calumet has scheduled a turnaround for its hydrotreater at their Shreveport, Louisiana, paraffinic base oil plant in October. The Shreveport base oil facilities have the capacity to produce 4,800 barrels per day of API Group I and 7,000 b/d of API Group II base stock.

It was heard that Paulsboro Energy would be taking its 11,000 b/d Group I plant off-line in the first quarter of next year for a turnaround as well, according to market sources, but this could not be confirmed with the producer.

There is talk that Chevrons product from the new Pascagoula, Miss., plant will not enter the market until next year, instead of the fourth quarter of 2013 as previously anticipated.

Chevron is targeting mechanical completion of the plant by the end of the year, a company spokesperson said. The company has not specified when the product would be commercially available, but said that the company would be applying strict standards and processes to ensure a safe start-up of the plant. We are committed to being a reliable partner, and we are working directly with customers using conservative timing to ensure we meet their needs, the spokesperson added.

Upstream, WTI (West Texas Intermediate) crude futures continued to hover at levels well above $100 per barrel, but eased in the last three trading sessions as President Obama awaited approval from Congress for a possible military strike in Syria.

WTI settled on the CME/Nymex at $108.54 per barrel on Tuesday, Sept. 3, down 47 cents from last Tuesdays settlement at $109.01/bbl.

Brent crude was trading at around $ 115.68 per barrel late yesterday on the CME, up from $114.36 a week ago.

LLS (Light Louisiana Sweet) was trading at a premium to WTI of $4/bbl on Aug. 31, compared with $3.20/bbl on Aug. 26.

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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