U.S. Base Oil Price Report


The market remains tight in the United States, with producers reporting healthy demand and underscoring that conditions were not likely to ease until August or September.

A majority of suppliers were focusing on fulfilling contract obligations, while extra availability was generally deemed fairly limited, which supported stable posted and spot prices.

Buyers argue that base oils are under downward pricing pressure because of the recent slide in crude oil and feedstock values. Producers, on the other hand, contend that supply is unlikely to lengthen for at least a couple months, and that tight conditions are exerting upward pressure.

Within the API Group I segment, bright stock is still very snug in the domestic market, and a number of cargoes were heard to have been booked from Asia and Brazil, with many of them making their way into Mexico due to a lack of U.S. offers.

A large trader was also heard to be bringing in other grades, beside bright stock, while requirements from South America also continued to surface.

Participants said that product coming from Asia was exposed to the risk that prices may have softened once the cargoes arrived due to the longer lead time.

Aside from recent and ongoing turnarounds, a production hiccup at a large refiners Group I and II facilities was rumored to be restricting its ability to offer spot parcels out of the U.S.

The base oil train at Motivas Port Arthur, Texas, refinery, that was taken off-line in May for a turnaround, was restarted last week, and is running well, sources said. The three base oil trains at the facility are currently operating at capacity, although there was talk that a second train would be shut down for maintenance in the next few weeks.

Chevrons Richmond, Calif., Group II base oil plant, which has been undergoing maintenance, was restarted last week. A new generation Chevron catalyst has been installed and the plant is running very well, according to sources.

There were reports that Petro-Canada has delayed a turnaround at its Mississauga, Canada, plant from August to the last quarter of the year. The facility is expected to be taken off-line for four to six weeks and the producer was heard to have placed base oils on allocation.

There was no producer confirmation about the turnarounds.

Rumblings were also heard about a couple of rerefiners placing their production on allocation due to strong requirements against strained inventories.

A Petroleos de Venezuela (PDVSA) tender that was floated a couple of weeks ago was heard to have been cancelled because no suppliers were able to offer material.

Within the Group III segment, conditions were described as incredibly stable, and no price fluctuations were reported.

Naphthenic suppliers also reported generally steady pricing and robust demand, with export requirements having gone up recently, and spot prices remaining on firm ground.

Upstream, crude oil futures regained lost territory, as traders anticipated a possible decline in U.S. supplies.

Oil prices had been on a downward trek over the last couple of weeks, as a rise in supplies threatened to undercut efforts by OPEC and its partners to achieve a drawdown in global oil inventories by trimming production.

OPEC states and 11 other exporters agreed in May to extend cuts of 1.8 million barrels per day until March 2018, in hopes that this would allow for global supply and demand to balance out.

However, U.S. shale oil output is up around 10 percent since last year to approximately 9.35 million barrels per day. Other non-OPEC producers like Brazil, as well as OPEC members Nigeria and Libya – who are exempt from the cuts – have also increased output.

West Texas Intermediate futures on the CME/Nymex traded at $44.24 per barrel on June 27, up $1.01/bbl from $43.23 per barrel on June 20.

Light Louisiana Sweet wholesale spot prices closed at $45.14 per barrel on June 26, and had settled at $46.19/bbl on June 19, according to data from the U.S. Energy Information Administration.

Brent was trading at $46.65/bbl on the CME on June 27, up 63 cents/bbl from $46.02/bbl on June 20.

Low sulfur vacuum gas oil (VGO) was at Aug WTI plus $8.75/bbl ($52.13/bbl), and high sulfur VGO was at crude plus $7.00/bbl ($50.38/bbl) on June 26, according to data from PetroChemWire. Numbers were slightly lower than a week ago, when low sulfur VGO was at $52.70/bbl, and high sulfur VGO was at $50.70/bbl.

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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