U.S. Base Oil Price Report


Following several months of price upheavals, the U.S. base oil market seems to have regained its footing, with posted prices holding at steady levels and demand starting to perk up.

A number of suppliers agreed that the fact that buyers had started to inquire about prices and volumes was encouraging, and that this could be the prelude to the spring buying campaign.

One seller commented that demand had been stronger than anticipated since the beginning of the year, but others said buying patterns were still inconsistent, with some days being better in terms of orders than others.

What did seem to be fairly uniform is that most buyers were interested in securing modest volumes. A supplier said it had received many inquiries for flex bags from all over the world, which was a sign that customers were not ready to commit to large quantities.

While conditions seemed to be slightly more settled in the base oil segment, participants did not lose sight of crude oil prices, which remained fluid and continued to impact derivatives.

Another element that was still worrisome was the ready availability of most base oil grades, which was still placing pressure on prices, particularly spot and export indications.

Bright stock appeared to be tightening, according to sources, but other API Group I cuts were impacted by the plentiful availability of competitively priced Group II oils which could be used as a substitute.

However, there was talk that Group II suppliers had stopped offering some cuts at low spot levels because of the rebound seen in crude oil values recently.

There continued to be appetite for bright stock in Mexico, but U.S. suppliers were faced with competition from product of European origin, although some participants thought this was an argument that buyers were utilizing in order to achieve better pricing.

A 3,000-metric ton cargo was in discussions for the Mexican market, but it had stirred lukewarm interest, according to sources.

Mexican buyers have slowly started to buy some imports, even though local producer Petroleos Mexicanos (Pemex) lowered its domestic prices for February shipments. The Mexican peso has also weakened as oil prices plunged, and that was another hurdle for imports, sources added.

In production news, South African producer Sasol communicated that the company would be postponing its final investment decision on the construction of a gas-to-liquids (GTL) plant in Lake Charles, La., that could produce as much as 9,000 barrels per day of GTL base oil. (For details, see story in this issue of Lube Report).

In other industry news, the United Steelworkers Union strike, which commenced on Feb. 1 in nine U.S. refineries and has extended to several more units, has not been resolved. The strike has had limited impact on base oil deliveries from one of the affected refineries, the LyondellBasell refinery in Houston, Texas.

The unit was heard to be running, and shipping out base oil on barges and tank cars despite the strike, but truck shipments have been suspended. The plant can produce 3,600 b/d of naphthenic base oils and 1,000 b/d of paraffinic oils.

Upstream, crude oil prices staged the biggest two-week rally in 17 years on speculation that decreasing investments in oil rigs would slow U.S. production growth.

However, futures were lower than the previous week as the steelworkers strike had caused prices to fall on expectations that it would result in decreased processing of crude products and an increase in crude availability.

WTI futures settled on the CME/Nymex at $50.02 per barrel on Feb. 10, down $3.03 per barrel from a settlement at $53.05 per barrel on Feb. 3.

Brent crude was trading around $56.43 per barrel on the CME on Feb. 10, down $1.48 per barrel from $57.91 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.

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