The U.S. base oil market was anticipated to remain fairly stable over the next few days, with the summer holidays lending just a tinge of somnolence to trading activity.
A number of producers agreed that requirements had been coming in at a regular pace over the past several weeks and inventories were well-balanced to tight, both on the paraffinic and naphthenic sides of the business.
Domestic demand is strong, with steady and consistent purchases so far this year, a supplier noted.
Export movements have slowed down slightly, with requirements said to be spotty for some grades, but there is not much extra material available at the moment, as most volumes have already been committed, sources explained.
A supplier said that it continued to receive calls from export brokers looking for cargoes, but the seller had not participated in export transactions recently. Most buying interest appears to stem from Mexico and South America.
Market players have been looking for spot cargoes for the months of July and August, with some large-volume buyers concerned that supply will remain snug and pricing not likely to decrease any time soon.
Another source concurred that given the recent turnaround at the Excel Paralubes plant in Westlake, Louisiana, and the substantial amounts of product that has moved overseas in the previous two months, API Group II supply was tight. Group I availability is limited, too, sources added.
Posted base oil prices are expected to remain stable in the near term, following increases implemented in May and June.
The steeper base oil values, together with improving fundamentals, triggered upward adjustments in the finished lubricants segment in recent weeks. Buyers, logically, did not particularly welcome these markups, but the movements did herald a more confident business environment.
The U.S. Purchasing Managers Index measured by the Institute for Supply Management signaled continued expansion in June, coming in at 53.2, up from 51.3 in May and well above market expectations of 51.4.
Meanwhile, on the crude oil front, West Texas Intermediate futures jumped by more than four percent on Tuesday in a technical correction, after hitting two-month lows in the previous session. Expectations that reports by the U.S. Energy Information Administration would show further declines in crude stockpiles this week contributed to the upward momentum.
WTI futures settled on the CME/Nymex at $46.80 per barrel on July 12, up 20 cents per bbl from the July 5 settlement of $46.60 per bbl.
Light Louisiana Sweet wholesale spot prices closed at $46.38 per bbl on July 11, compared to $50.97 per bbl on July 1, according to data from the U.S. EIA.
Brent was trading at $48.47 per bbl on the CME on July 12, up 51 cents per bbl from $47.96 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.