The U.S. base oils market was expected to regain a more dynamic rhythm following the Labor Day holiday, with suppliers hoping that orders would pick up as the week progressed.
Posted prices were assessed as stable this week, and no initiatives have emerged following Chevron’s increase on Aug. 24 – which was thought to have been prompted by an upcoming turnaround at the producer’s Richmond, Calif., base oil plant.
The shutdown would potentially take 20,700 barrels per day of API Group II oils out of the U.S. supply system, but no producer confirmation could be obtained about the plant’s maintenance program.
At the same time, buyers pointed out that while the turnaround could tighten the market, the typical slowdown in domestic demand during the fall would offset some of the impact of the outage.
There were also reports that due to the recent healthy appetite for heavy-viscosity Group II grades and the expected turnaround at the Chevron plant, supply of 600 neutral remained very tight, with one producer said to have placed this cut on allocation.
Other grades are more plentiful, and as a result spot prices edged down over the course of last week, in particular for some of Group I oils.
There has also been talk about Group III oils being offered in the U.S. from origins other than South Korea. Sources said Middle Eastern and Russian material was available at competitive prices, but that most of the products lack finished lubricant approvals that blenders require.
Meanwhile, a slight uptick was seen in buying interest for U.S. exports, as players in Europe and South America are planning orders for the next few months, and the recent drops in spot prices were seen as an incentive. However, a certain sense of caution is prevalent due to volatility on the crude oil front, because falling crude costs could exert downward pressure on base oil prices moving forward.
Crude oil futures settled almost flat on Tuesday on skepticism that major producers would agree on a production freeze, which would help reduce a global oversupply. U.S. inventories of crude oil and refined products continue at a record high, according to the Energy Information Administration.
Futures had moved up in electronic trading on Monday as Russia and Saudi Arabia signed an agreement to set up a task force to review oil market fundamentals and recommend measures to attain market stability. The gains were short-lived as the news disappointed traders who had been hoping the top producers would agree to a production freeze.
WTI futures on the CME/Nymex settled at $44.83 per barrel on Sep. 6, down $1.52 per bbl from the Aug. 30 settlement of $46.35 per bbl.
Light Louisiana Sweet wholesale spot prices closed at $46.02 per bbl on Sep. 2, down from $48.57 per bbl on Aug. 29, according to data from the U.S. Energy Information Administration. There was no trading on Sep. 5 due to the Labor Day holiday.
Brent was trading at $47.26 per bbl on the CME on Sep. 6, down $1.11 per bbl from $48.37 per bbl on Aug. 30.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.