Base oil market participants shared a fairly optimistic view of the current market situation, despite concerns that activity would start to slow down with the arrival of summer.
Suppliers said that demand had remained generally steady, but admitted that there were some pockets where requirements had declined slightly–namely in the low and mid-viscosity segments – with spot prices for these grades also moving down.
No further paraffinic base oil posted price changes were noted during the week, following price increases by Flint Hills Resources and Phillips 66 on API Group II heavy-vis oils.
Flint Hills lifted the posted price of its 600N cut 10 cents per gallon on July 13, while Phillips 66 moved up its 600N posting 16 cents/gal on July 15.
Suppliers were hoping that base oil prices would continue to hold at current levels, despite fluctuations on the crude oil side, because paraffinic base oil margins have been weak since the beginning of the year, sources said.
There were reports that Motiva had upped spot prices on its heavy-vis cut instead of revising postings in order to keep up with current market conditions and improve narrowing margins, but there was no confirmation from the producer about the price revisions. Other suppliers were heard to have followed Motiva’s lead and increased spot indications as well.
Talk about a possible turnaround at Chevron’s Pascagoula Base Oil Plant in Mississippi in August also circulated in the market. Production at the 25,000 barrels per day Group II facility started last year, and insiders doubted that the plant would need a turnaround so soon after start-up. However, it was heard that the producer was experiencing an issue at a crude tower that would be limiting availability of vacuum gasoil to the base oil plant for a couple of weeks, but this could not be directly corroborated with the producer.
While base oil demand in the U.S. has been better than expected, some players commented that requirements from Mexico had started to wane.
On the other hand, it appears that traders are on the lookout for Group I cargoes for export to South America in August. Shipping industry sources reported that space for shipments into South America has been tight throughout July, and is likely to remain so in August, mainly because of other petrochemicals moving south.
Upstream, West Texas Intermediate futures settled on the CME/Nymex at $50.36 per barrel on July 21, down $2.68 per barrel from their July 14 settlement of $53.04 per barrel.
Brent crude was trading around $57.04 per barrel on the CME on July 21, down $1.47 per barrel from $58.51 per barrel a week ago.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.