However, producers cite squeezed margins, despite the lower production costs, as one of the reasons why many base stock suppliers are holding on to current price levels and are not granting significant discounts.

In a few cases, large-volume customers have been able to negotiate price reductions for spot business, but these adjustments are not widespread, suppliers underscored.

While naphthenic base oil prices remain fairly stable, supported by healthy demand, paraffinic suppliers acknowledged that demand had lost steam both in the contract and spot segments as compared with previous months, but this is not uncommon in the fourth quarter. In fact, most suppliers figure the expected reductions into their yearly projections, sources added.

One source described demand as steady at best, while others said that requirements had dipped in late October and remained lackluster so far in November.

Producers have resorted to exporting product in their quest to lighten up inventories, with several parcels heard to be heading south from the U.S. Gulf into east coast South America, Mexico and Colombia. There were also a number of 13,000-14,000-metric ton lots moving to India.

While no confirmation about the results of the latest Petroleos de Venezuela (PDVSA) base oil tender could be obtained, there was talk that U.K.-based Stasco (Shell Trading and Shipping Co.) had been awarded the tender, mostly for API Group I cuts.

In production, there is mounting interest regarding the start-up of the new Chevron Group II base oils plant in Pascagoula, Miss., which is expected to take place in the first quarter of 2014. The company is targeting mechanical completion of the facilities by year-end, and once the plant starts up, Chevron will build working inventories of intermediate feeds and products in its distributions system, a company spokesperson said.

Last week, the company organized a day-long media event and tour of the Pascagoula facilities as many aspects of the project are complete and ready for operation. Through October 2013, the crews have completed 16 storage tanks, two new berths at the Chevron wharf and have installed major processing equipment, the spokesperson added.

Chevron plans to manufacture the same Group II grades of premium base oils as it is currently producing in Richmond, Calif., i.e. 100R, 220R and 600R, but will also offer a 60R cut to complete the companys global product slate of base oils.

While many players expressed concern about the added capacity entering the supply system, some remained optimistic, hoping that the additional supply would eventually be absorbed as global demand for Group II cuts rises, driven by stricter engine oil specifications and emission standards. Chevron officials maintain that there is already demand for “more than 100 percent” of the new capacity, according to an article published in gulflive.com.

Given the Veterans Day holiday on Nov. 11 and the AFPM (American Fuel and Petrochemical Manufacturers) International Lubricants and Waxes Meeting taking place in Houston on Nov. 14-15, base oil activity was fairly subdued during the week.

Upstream, West Texas Intermediate (WTI) crude futures were trading higher as meetings conducted in Geneva between six world powers and Iran yielded no agreement about the nations nuclear program.

WTI settled on the CME/Nymex at $93.04 per barrel on Tuesday, Nov. 12, down 33 cents from last Tuesdays settlement at $93.37/bbl.

Brent crude was trading at around $105.81 per barrel late yesterday on the CME, up 48 cents from $105.33 a week ago.

LLS (Light Louisiana Sweet) was trading at a premium to WTI of around $4/bbl on Nov. 11, compared with $3/bbl on Nov. 5.

Low sulfur VGO was showing a differential to WTI of $10.50 to $11.50/bbl on Nov. 11.

Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.