The U.S. base oils market maintained a steady course, with current and upcoming turnarounds expected to do little to upset the supply/demand balance. Any supply shortfalls that may result from the shutdowns seem likely to be offset by the seasonal slowdown in demand.
A number of suppliers appeared fairly satisfied with base oil volumes sold in September, but have already forecast slightly reduced demand for the month of October, based on market behavior in recent years.
Buyers agreed that refiners appeared to be in fairly balanced positions, with some room to accommodate extra sales, but underscored that there had not been much upward or downward movement in terms of pricing.
A couple of consumers confessed that several suppliers had been flexible about agreeing to discounts off of posted prices for spot transactions, and that this situation had been ongoing for several weeks. However, it would not be surprising if this type of activity became more prevalent as availability could grow more plentiful and demand might not be as healthy as a couple of months ago, sources said.
In the naphthenic segment, prices have also shown little fluctuation, following the implementation by a majority of suppliers of the 15 cent/gal increase at the end of July/August. A producer said that business was proceeding at a steady pace and that all grades of naphthenics were balanced very nicely.
A market participant said that transformer oil demand is often driven by the housing market, and since this segment of the U.S. economy has been performing well with plenty of new construction, demand for transformer oil should also remain high in the short term.
As far as production is concerned, Calumet shut down the catalytic dewaxing unit at its 7,000 b/d Shreveport, La., Group II facility last week, but expects to restart it by Oct. 7. The producer foresaw no delays in its scheduled deliveries of 80, 100, and 150 cuts, which were the only products affected by the turnaround.
There were rumblings about Motivas Port Arthur refinery having experienced another production setback during the week, but a company source reiterated that base oils were running at normal rates and that all the problems were in the new VPS-5 unit. This unit is the largest of the refinerys three crude distillation units, and its vacuum section produces vacuum gas oil, which is then refined into motor fuel at the neighboring hydrocracker, according to market sources.
Upstream, WTI (West Texas Intermediate) crude futures slipped for a third day as lawmakers failed to agree on a funding bill, leading to a U.S. government shutdown which could bring about a slowdown in the countrys economic growth in the fourth quarter.
WTI settled on the CME/Nymex at $102.04 per barrel on Tuesday, Oct. 1, down $1.09 from last Tuesdays settlement at $103.13/bbl.
Brent crude was trading at around $107.94 per barrel late yesterday on the CME, down 70 cents from $108.64 a week ago.
LLS (Light Louisiana Sweet) was trading at a premium to WTI of around $2.40/bbl on Sept. 27, compared with $1.20/bbl on September 20.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.