This is partly because some cuts are not readily available – which is the case of a few high-vis grades – but it is also because there is no demand for extra product, sources said. As a result, some discounting has been taking place, and it is difficult to gauge where exactly prices are at the moment, sources added.

Aside from the fact that historically, July and August tend to be slower months in terms of demand, this year there is the additional element of increased capacity coming on stream that needs to be computed into the equation.

Chevrons new 25,000-barrels-per-day base oil plant in Pascagoula, Miss., has started operations, but consumers are not likely to see much of this product until August or even later, industry sources said.

Nevertheless, buyers are counting on a price war to break out among producers once the extra product hits the market. Although Chevron has assured the industry that most of the new volumes will be exported, there is little doubt that the additional base stock will have an impact on the domestic market as well.

Buyers stock positions are believed to be satisfactory, and most have turned cautious in terms of securing extra product moving forward, some sellers said. Buyers are in good shape, buying only what is needed and are not in build-up mode, a source commented.

The market is also expected to be better supplied once the Excel Paralubes Group II base oil unit in Westlake, La., comes back on stream in late August, following an extended turnaround which started at the end of June. The plant can produce 22,200 b/d of Group II base oil, and this output is shared by Flint Hills Resources and Phillips 66.

While the producers continue to ship product to their contract customers during the shutdown, there has not been any spot availability from that plant for the last several weeks while the suppliers were building inventories.

In industry news, Ergon, Inc., announced plans to enhance its subsidiaries facilities in the Appalachian Basin, according to a press release posted on the companys website on July 1. The Appalachian Basin comprises the Marcellus Shale and Utica Shale Plays. The subsidiaries assets and capabilities in the Appalachian Basin include a paraffinic refinery, a crude oil and condensate pipeline, six crude oil terminals, a fleet of more than 100 trucks, and eight boats and barges.

Ergon expects to start up 10,000 barrels per day of condensate stabilization capacity at its Marietta, Ohio, river terminal in the fourth quarter of this year. The natural gas liquids (NGLs) or field condensate produced in natural gas fields must be stabilized for storage and transportation in pressurized and/or atmospheric vessels, according to engineering firm Joule Processings website. This process will result in lower vapor pressure condensate for ultimate marketing, Ergon said.

Additionally, Ergon plans to add 10,000 b/d of condensate stabilization capacity at its refinery in Newell, W. Va., in 2015, while also installing new capacity at its 23,000-b/d specialty refinery in 2016.

In other news, Hurricane Arthur, the first hurricane of the season, hit North Carolina on July 4 and weakened as it moved up the coast, leaving some flooding and power outages along its path. It then went ashore as a post-tropical storm in southwestern Nova Scotia, according to the Canadian Hurricane Centre.

Upstream, West Texas Intermediate crude traded near a one-month low as concerns over oil supply reductions due to the insurgency in Iraq were somewhat assuaged by the fact that the southern region of the country is still producing oil.

WTI settled on the CME/Nymex at $103.40 per barrel on July 8, down $1.94 from a settlement at $105.34/bbl on July 1.

Brent crude was trading around $108.94 per barrel on the CME, down $3.35 from $112.29/bbl a week ago.

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