U.S. Base Oil Price Report


Tight conditions continue to reign in the United States, with several producers still reporting sold-out positions and a number of suppliers struggling to catch up on orders, despite the gradual restoration of output levels.

Production rates at two large facilities in Texas, which had been shut down due to severe flooding caused by hurricane Harvey, were heard to have attained normal levels.

The allocation programs implemented as a result of the producers force majeure were anticipated to be lifted as soon as the suppliers were able to start building inventories, which should occur in the next few weeks, sources said. The market seems to be about a month away from getting back to balanced/normal operations, a source commented.

As a result of the improved run rates, spot availability was also expected to increase in the domestic market, while price pressure should start to subside.

API Group I spot prices have been moving up as demand for the lighter cuts within this segment has been healthy, given limited availability of Group II cuts and the possibility of replacing these oils with their Group I counterparts. Group I producers also lifted posted prices on all grades except for bright stock.

However, the recent price increases and a seasonal slowdown have dampened buying interest this week, sources conceded.

There are still many spot inquiries that go unfulfilled, and some of them have been met by imports from other regions, particularly as far as requirements from Mexico and South America were concerned.

Reports of a spot inquiry for a small parcel of bright stock and a mid-viscosity grade ex-Colombia circulated the market, and there appeared to be little extra U.S. product to meet this requirement.

Despite the improving supply levels, higher production costs due to recent increases on the crude oil and feedstocks side continued to exert upward pressure on base stocks, supplier sources noted.

This cost pressure was another of the elements that fueled the recent price increases implemented on both the paraffinic and naphthenic fronts in October and early November.

In Mexico, buyers also lamented the climb of base oil prices and the limited number of purchase options, as local production has been shut down for a few weeks and there is only a trickle of spot exports from the U.S. going into Mexico.

The steeper base oil values also translated into higher prices for finished lubricants and additives in the U.S. This week, a number of producers — including Shell, BP Lubricants USA, Phillips 66, Citgo and Omni Specialty Packaging – joined the group of manufacturers who announced increases in the last couple of weeks and plan to implement hikes in December (for details, see More U.S. Finished Lube Prices to Rise in this issue of Lube Report).

Upstream, crude oil jumped to another two-year high on Monday, in the wake of the so-called purge in Saudi Arabia. The purge, which took place over the weekend, was reportedly orchestrated by the Saudi Crown Prince Mohammad bin Salman, and was said by analysts to have been carried out to consolidate his power, led to the arrests of dozens of princes, military leaders and ministers on corruption charges.

Oil traders were also waiting for the release of OPECs highly anticipated World Oil Outlook, due to be published on Nov. 7.

On Tuesday, Nov. 7, West Texas Intermediate futures settled on the CME/Nymex at $57.20 per barrel, up $2.82/bbl from $54.38 per barrel on Oct. 31.

Light Louisiana Sweet wholesale spot prices closed at $63.22 per barrel on Nov. 6, up from $60.29/bbl on Oct. 30, according to data from the U.S. Energy Information Administration.

Brent was trading at $63.69/bbl on the CME on Nov. 7, up $2.32/bbl from $61.37/bbl on Oct. 31.

Low sulfur vacuum gas oil was at Dec WTI plus $12.75/bbl ($70.10/bbl) and high sulfur VGO was at crude plus $11/bbl ($68.35/bbl) on Nov. 6.

In comparison, low sulfur VGO was hovering at $67.40/bbl and high sulfur VGO was at $65.40/bbl on Oct. 30, according to data published by PetroChemWire.

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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