The U.S. base oil market is slowly returning to action after the Fourth of July holiday with healthy demand, balanced inventories and unchanged pricing.
With crude oil prices moving within a fairly narrow band over the last couple of weeks and business characterized as steady, base oil producers did not appear to have much incentive to revise pricing.
A majority of suppliers polled agreed that June had been a strong month in terms of orders, and expected July to reflect similar characteristics. June shaped up well, and there is no indication July will ease, a supplier noted.
Several players mentioned that availability for the heavy-viscosity grades in the API Group I and Group II categories remained tight as a result of healthy domestic demand, as well as substantial export activity in recent months.
A number of Group II producers have shipped large volumes to Europe and Asia in recent months, with one Group II supplier heard to have exported over 26,000 metric tons in April and 38,000 tons in May – some of it to support its own customers in other regions – although these figures could not be confirmed with the supplier directly. Another producer was heard to have exported similarly large quantities as well.
Buying interest for Group II oils from China and neighboring nations has been robust due to a two-month turnaround at Formosa Petrochemical’s Group II plant in Mailiao, Taiwan, which is expected to be completed in late August.
A couple of naphthenic producers were also heard to have been very active on the export front, but not to the same extent as their paraffinic counterparts.
Buying interest from Mexico continues to be fairly good, a source noted, and the local producer, Pemex, is running its 6,000 barrels per day Group I plant Salamanca, Mexico, at normal rates, although there have been minor production hiccups in recent months.
Upstream, crude oil futures tumbled on Tuesday as investors were concerned that Britains exit from the European Union would negatively impact the global economy. Signs of an oil supply glut, together with expectations that data on China would show slowing growth, added to the pressure.
West Texas Intermediate futures settled on the CME/Nymex at $46.60 per barrel on July 5, down $1.25 per bbl from the June 28 settlement of $47.85 per bbl.
Light Louisiana Sweet wholesale spot prices closed at $50.97 per bbl on July 1 (there was no trading on July 4), compared to $47.50 per bbl on June 27, according to data from the U.S. Energy Information Administration.
Brent was trading at $47.96 per bbl on the CME on July 5, down 62 cents per bbl from $48.58 per 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.