U.S. Base Oil Price Report


U.S. base oil postings were unchanged, but spot prices continued to move south, reflecting the softer conditions that typically characterize business in the last month of the year.

As expected, it is going to be a challenging December, a source noted.

In an effort to reduce stock levels, suppliers are trying to entice buyers by offering attractive discounts and temporary competitive allowances (TCAs) into a number of accounts.

Price drops between 5 and 10 cents per gallon for the API Group I and II light and mid-vis grades, and between 2 to 5 cents/gal for the heavy cuts were seen for domestic spot business compared to two weeks ago, and contract shipments have also been moving at steeper discounts over posted prices than usual.

The light and mid-viscosity grades remained more exposed to the price deterioration because of plentiful supply, sources explained.

Availability of the Group II heavy grade was still fairly tight on the back of ongoing maintenance at the Chevron plant in Richmond, Calif., and an upcoming turnaround at the Excel Paralubes plant in Westlake, La.

Phillips 66 and Flint Hills Resources, who jointly market base oils produced at the Excel Paralubes unit, were understood to be building inventories ahead of a turnaround in March of next year, limiting offerings of Group II spot volumes.

Sources said that spot prices for the Group II 600 cut had slipped by about 2 to 5 cents/gal from a week ago, but the lower numbers were not widespread because of generally snug conditions for this cut.

Within the same tier, prices for the 100N have edged down significantly since October and were mentioned at around $1.55 to $1.65/gal.

In the Group I segment, there were mixed reports about bright stock values, with those suppliers who have ample inventories heard to have dropped their domestic spot numbers to $2.85-$3/gal and below, and export indications hovering at even lower levels. A U.S. supplier was rumored to be offering extremely competitive numbers into Mexico to capture additional orders.

Domestic contract business was deemed largely steady, but spot buying interest has declined. Several buyers were said to be shopping around to locate the lowest spot offers, and there were also rumblings that export prices were even more depressed than those seen on the domestic front.

Mexican buyers were also heard to be on the look-out for attractively-priced cargoes–particularly as an unfavorable exchange rate is turning imports more costly–but these end-users appear rather conservative in terms of volumes being purchased.

A number of sellers were heard to have shown interest in participating in an Egyptian tender calling for bright stock, SN150 and SN600 molecules, but further details were unavailable.

Despite the heavy discounting for domestic spot business, suppliers seemed rather reluctant to alter the current posted price structure.

Sources commented that if no posted price changes were undertaken in December, then the market would likely coast along until the start of the spring buying season in February, which would lend support to more stable pricing.

In the naphthenic base oils arena, business has been average, with no significant fluctuations in terms of demand, and there have not been as many spot price cuts as on the paraffinic side, according to sources.

Upstream, West Texas Intermediate futures slipped by as much as 4 percent on Tuesday on signs that OPEC members were facing difficulties in coming to an agreement on a production cut to reduce global oversupply.

The OPEC will meet in Vienna on Wednesday and was expected to implement a deal outlined in September to cut output by around 1 million barrels per day from around 33.82 million bbl/day in October.

But Iran and Iraq were resisting pressure from Saudi Arabia to curb oil production, and this dimmed the likelihood of a deal.

WTI futures on the CME/Nymex settled at $45.23 per barrel on Nov. 29, down $2.80 per bbl from the Nov. 22 settlement of $48.03 per bbl.

Light Louisiana Sweet wholesale spot prices closed at $47.16 per barrel on Nov. 28, down from $48.36 a week ago, according to data from the U.S. Energy Information Administration.

Brent was trading at $46.38 per bbl on the CME on Nov. 29, down $2.74per bbl from $49.12 per bbl on Nov. 22.

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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