In a slightly surprising move, Motiva will be decreasing its base oil prices once again, only five weeks after the producer had initiated a similar adjustment on Sep. 9.
According to sources, Motiva intends to lowerthe price of its API Group II STAR 4 cut (110 vis), its STAR 6 cut (220 vis), and its STAR 12 cut (600 vis) 10 cents per gallon, effective Oct. 14.
While the previous adjustment had been mostly prompted by sliding crude oil and feedstock prices against ample supply of the low- and mid-viscosity grades, it appears that the producer’s motives were slightly different this time.
Market sources indicated that the revision was likely intended to inhibit the movement of Asian Group II cargoes to the U.S., as Asian producers are trying to take advantage of the arbitrage that is currently open between the two regions.
Earlier in the year, several U.S. base oil cargoes had been shipped to Asia (India in particular) but Asian base oil prices have declined steadily over the last three months, reversing the situation and making the U.S. market more attractive for Asian suppliers.
It was heard that at least two large cargoes of heavy-vis products were on their way to the U.S., and talk circulated that one of the cargoes might be a Group II 600N lot from a South Korean supplier to support a U.S. producer whose plant had been experiencing production hiccups. However, this could not be confirmed.
The heavy-vis cuts, both in the Group I and II categories, continue to be characterized as tight in the domestic market, but requirements are expected to gradually start to weaken in November, with the slowdown becoming more pronounced in December and January.
Supplier sources also said that blenders’ business had picked up in the last couple of weeks and that inventories were balanced, with October orders showing better performance than expected so far.
With the ILMA meeting in Boca Raton, Florida, taking place over the weekend (Oct. 17-20), participants did not expect price discussions to pick up again until after the event.
Upstream, West Texas Intermediate (WTI) futures dropped more than 5 percent on Monday after the release of an OPEC report that showed that oil production would outstrip demand. Values edged higher on Tuesday, but dipped again after the International Energy Agency in Paris reported that the global crude glut would continue into 2016.
West Texas Intermediate closed on the CME/Nymex at $46.66 per barrel on Oct. 13, down $1.87 per bbl from its Oct. 6 settlement of $48.53.
Brent was trading around $49.24/bbl on the CME on Oct. 13, down $2.68/bbl from $51.92/bbl a week earlier.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.