U.S. Base Oil Price Report


Cross Oil joined other naphthenic base oil producers in lowering prices this week, while the paraffinic side of the business was muffled, with no price changes noted.

Cross communicated that it would be decreasing prices by similar amounts to those recently applied by the other pale oil producers, which ranged 15 to 25 cents per gallon. Cross price reduction will become effective Jan. 30.

Ergon was the first naphthenic producer to step out with a price cut this year, trimming prices by 15 to 25 cents/gal on Jan. 13, while Calumet marked prices down by 20 cents/gal on Jan. 22, the same date that San Joaquin selected for its 25-cents/gal downward adjustment.

The stalled decline of crude oil prices seen over the last couple of days has awarded paraffinic oil producers a bit of a respite in terms of price movements, following several weeks of downward price adjustments intended to catch up with plunging crude oil and feedstock vacuum gas oil values.

Most participants are still watching developments in the crude oil arena intently, and the possibility of further base oil price revisions cannot be completely discarded, sources said.

Aside from the pressure emanating from the feedstock side, the need to remain competitive has not gone away, sources underlined, as the market remains oversupplied, and additional capacity is expected to be introduced in the first quarter.

While there has not been any official communication as to when the expansion at ExxonMobils Baytown, Texas, Group II/II+ plant will be coming on stream, there was talk that test runs would be starting in January and the first commercial shipments from the plant would begin in the mid-February to early March timeframe.

Also in production, it was heard that Paulsboro Refinings 11,000 barrels per day API Group I plant in Paulsboro, New Jersey, was running well despite the threat of a major winter storm expected to hit the Northeastern part of the country on Jan. 27. The blizzard dumped about two feet of snow in Boston, lower New England and Long Island, but New Jersey, Philadelphia and New York City were largely spared, only seeing a couple of inches.

Domestic base oil demand continues to be described as sluggish, inventories are high, and it was anybodys guess when requirements would start to pick up. Nevertheless, suppliers tried to remain optimistic, hoping that activity would improve ahead of the spring production season.

A number of U.S. producers were heard to be working on possible export shipments to East Coast South America, Brazil, and – to a lesser extent – India.

The volumes shipped to countries such as India were said to have decreased over the last six months because of increased base oil production in Asia and softening prices in other regions, which made U.S. indications less attractive.

There have been some U.S. offers of bright stock and Group II oils to the Middle East as well, but interest has been lukewarm at best as participants stressed that cargoes undertaking a long haul were risky because prices may have fallen from agreed levels by the time the parcels reached their destination.

Upstream, West Texas Intermediate crude futures traded in positive territory on a weaker dollar, but gains were capped by concerns over a significant build in U.S. crude stocks.

While there were some signs that the price of crude may be stabilizing near $45 to $50/bbl, the market may not have found a bottom yet, Saudi Prince Alwaleed Bin Talal, chairman of Kingdom Holdings, told CNBC last week, following the death of his uncle, King Abdullah.

He said that a “confluence of events” has spurred the fall in oil’s price, and not a Saudi plot to harm America’s fracking industry as some analysts have suggested. Alwaleed also said that the lack of balance between crude supply and demand means the road back to higher prices will be neither easy nor fast.

On the other hand, the Secretary General of the Organization of Petroleum Exporting Countries (OPEC), Abdullah al-Badri, said Monday that oil may jump to $200 per barrel without adequate long-term investments in the sector, which have been discouraged by the sharp fall in crude prices over the last seven months.

WTI settled on the CME/Nymex at $46.23 per barrel on Jan. 27, down 16 cents per barrel from a settlement at $46.39 per barrel on Jan. 20.

Brent crude was trading around $48.16 per barrel on the CME on Jan. 26, up 17 cents per barrel from $47.99 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.

Related Topics

Base Oil Reports    Base Stocks    Market Topics    Other