U.S. Base Oil Price Report


Several U.S. base oil suppliers describe demand as steady, but a few admit that requirements have slowed down, although they still fall within expectations for this time of the year.

Producers had predicted, based on the historical behavior of the market, that demand would start to decline towards the end of October, as buyers try to reduce inventories ahead of the years end and limit their orders to those volumes that need to be consumed on a daily basis.

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Although some customers had padded inventories in advance of the hurricane season, many consumers had not stockpiled at all as they felt that there was little supply risk in a well-supplied industry, according to a supplier.

The seller also said that activity stemming from retail fall promotions has already petered out, adding that since some companies work with a September 30 fiscal year-end, many inventories have already been drawn down as well.

Likewise, producers prefer not to end the year with hefty stocks and are finding various ways of placing product, either by offering competitive spot indications in the domestic market, or by exporting significant quantities to Latin America and Asia.

Given that Europe has plentiful domestic availability, there is not much incentive to ship product to that region, unless it is to fulfill some intra-company requirements, sources explained.

Market participants in Asia acknowledged that large volumes of U.S. paraffinic base stocks, particularly API Group II cuts, were expected to arrive during the next few weeks and that the additional product was placing downward pressure on prices.

On the naphthenic front, domestic demand is largely holding at healthy levels, offering support to stable pricing.

Upstream, West Texas Intermediate crude futures traded below $100 per barrel on the back of growing crude stockpiles in the U.S. and slow pre-winter demand.

WTI may extend its slide below $100 a barrel through the end of the year as U.S. supplies rise, tensions over Iran ease and political disputes in Washington continue, a Bloomberg survey on prices showed.

WTI settled on the CME/Nymex at $97.80 per barrel on Tuesday, Oct. 22, down $3.41 from last Tuesdays settlement at $101.21/bbl.

Brent crude was trading at around $109.97 per barrel late yesterday on the CME, up 1 cent from $109.96 a week ago.

LLS (Light Louisiana Sweet) was trading at a premium to WTI of around $1.80/bbl on Oct. 19, compared with $2.50/bbl on Oct. 14.

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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