Base oil prices were receiving support from fairly balanced supply and demand conditions, together with steep crude oil prices, which led to a generally stable outlook for the coming weeks.
A majority of suppliers reported that inventories were lower this December than at the same time a year ago, likely due to unexpected hurricane-related production outages in the second half of the year.
API Group I producers confirmed that supply remained tight, but there seemed to be a few extra barrels of SN500/600 available. In fact, while most grades maintained their price levels quite readily, the 500/600-vis has lost some ground, with spot bids heard to have edged down by around 10 cents per gallon from the previous month’s indications.
On the other hand, the lighter grades were said to be snug, and prices were steady.
Bright stock, which had been in limited supply since September, was regaining a more balanced position against requirements, according to sources.
Interest for Group I base oils from Mexico was said to be steady, particularly for the light-viscosity grades, but it was expected to soften somewhat ahead of the year-end holidays. Some buyers were able to secure cargoes following discussions at the ICIS Pan-American Base Oils and Lubricants Conference at the end of November, but a number of consumers preferred to defer purchases until after the holidays, sources said.
In the Group II segment, supply levels were heard to be improving, given the return to production of most U.S. Gulf facilities. Buyers reiterated that a few spot cargoes had cropped up in the market, a change from a few weeks back when virtually no spot volumes could be obtained.
Requirements for Group III oils continued to be mostly met by imports from South Korea and the Middle East, sources noted. However, the situation may change slightly as Motiva will be introducing Group III base oils into the U.S. market in the coming weeks. Other North American producers of Group III oils include Petro-Canada, Calumet and Avista Oil.
In production news, rumblings continued to be heard that Luberef may not be bringing commercial material to the market from its expanded plant in Yanbu’ al Bahr, Saudi Arabia, in late December/early January as previously anticipated, but this could not be confirmed with the producer directly. The plant’s expansion will allow the company to produce Group II and additional volumes of bright stock, resulting in a capacity of 3,500 barrels per day of Group I and 14,200 b/d of Group II base oils.
Base oil market participants kept an eye on developments in crude oil pricing, as futures were up one day and down the next.
Oil prices settled lower on Tuesday as details about the potential duration of the Forties Pipeline shutdown emerged. Andrew Gardner, chief executive of the Ineos Forties Pipeline System, said the pipeline may be down for two to three weeks for repairs. The key North Sea pipeline was shut after a crack was found over the weekend, and this had driven prices up on Monday.
Crude prices also softened on investors’ concerns that the widening Brent-WTI spread would boost demand for US exports, encouraging producers to increase output and result in oversupply.
WTI closed at $57.14 per barrel on the CME/Nymex on Tuesday, Dec. 12, down 48 cents per barrel from $57.62/bbl on Dec. 5.
Light Louisiana Sweet wholesale spot prices settled at $63.97 per barrel on Dec. 11, up from $63.13/bbl on Dec. 4, according to data from the U.S. Energy Information Administration.
Brent was trading at $63.34/bbl on the CME on Dec. 12, up 48 cents/bbl from $62.86/bbl on Dec. 5.
Low sulfur vacuum gas oil was at Jan WTI plus $11.50/bbl ($69.49/bbl) and high sulfur VGO was at crude plus $9.50/bbl ($67.49/bbl) on Dec. 11. In comparison, low sulfur VGO was hovering at $69.22/bbl and high sulfur VGO at $66.97/bbl on Dec. 4, 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.