For many U.S. base oil suppliers, September is turning out to be better than expected in terms of demand, but others have seen a slight softening from August sales levels.
A number of sellers reiterated that August demand had been boosted by buyers jumping into the market to place orders before the implementation of increases, which had been announced earlier in the month, and that orders had slowed down since.
A paraffinic supplier differed and explained that requirements had been fairly steady since July. The seller predicted that September and October would be the last normal months of the year as demand historically tends to decline in November and December. Another supplier said that while contract orders were holding at steady levels, spot inquiries had tapered off.
On the naphthenic front, a producer said that the increases had been implemented smoothly in early August, but conceded that late August and early September orders had been somewhat slow. However, the producer expects requirements to improve in the next two to three weeks, as consumers have to replenish stocks, and there are already signs that they are gearing up for additional orders. Demand for transformer oil has remained strong and other cuts are starting to pick up as well, according to the producer.
A second supplier also noted that demand had not been impacted by the increases, because some buyers typically follow a certain pattern for their purchases and that potential price movements do little to alter this procedure.
There were comments in the market about expectations that Cross Oil would be adding a hydrotreater to its Smackover, Ark., facilities in 2014, but a company source said that at this point there was nothing to report about a possible expansion.
In other production related news, San Joaquin Refining has planned a turnaround at its Bakersfield, Calif., plant in March of 2014. The unit has the capacity to produce 8,100 barrels per day of naphthenic oils.
In other news, U.S. car sales jumped by about 17 percent in August from a year ago, to almost 1.5 million units, according to a Wall Street Journal report. August was the highest selling month this year and the best month since September 2008 for General Motors, North Americas largest automaker. Low interest rates and fairly steady job growth are encouraging consumers to trade in cars and trucks, the report added.
Upstream, WTI (West Texas Intermediate) crude futures fell as Syria has ostensibly agreed to a Russian proposal to surrender its chemical weapons, assuaging fears of a possible U.S. strike against Syria.
WTI settled on the CME/Nymex at $107.39 per barrel on Tuesday, Sept. 10, down $1.15 from last Tuesdays settlement at $108.54/bbl.
Brent crude was trading at around $113.72 per barrel late yesterday on the CME, down $1.96 from $115.68 a week ago.
LLS (Light Louisiana Sweet) was trading at a premium to WTI of $1.65/bbl on Sept. 10, compared with $4/bbl on Aug. 31.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.