U.S. Base Oil Price Report


Base oil participants reiterated that 2017 had been a very unusual year, with all the unexpected events that altered the supply picture, culminating with producers seeing the year off with better balanced inventories than in Decembers past.

Suppliers typically have to make an effort to place material during the last few weeks of the year in order to avoid product overhang, while buyers generally turn cautious in terms of how much product they commit to.

However, this time around, producers said they did not have to lower prices significantly in order to lower inventories, and that buyers likely did not find many year-end bargains as a result.

Only some of the grades, such as the heavy-viscosity cuts, were slightly longer, and therefore prices were more exposed to potential erosion, but the rest of the grades appeared to be enjoying stable fundamentals.

Negotiations with Mexican buyers were generally muted this week, and suppliers did not expect much fresh business to be concluded until after the holidays.

There was some discussion on the naphthenic side about the relentless increase in crude oil and feedstock prices since October, and how these conditions were exerting pressure on base oil prices as margins have narrowed. However, no initiatives had surfaced by close of business on Tuesday.

San Joaquin Refining will be shutting down its naphthenic base oil plant in Bakersfield, California, for a turnaround that will last three to four weeks, starting on Jan. 27, 2018. The unit can produce 8,100 barrels per day of naphthenic base oils. San Joaquin is limiting export sales, and has placed its light viscosity products on allocation to build inventory.

Crude oil prices have jumped by approximately $7 per barrel since early October. On Oct. 3, West Texas Intermediate futures traded on the CME/Nymex at $50.42 per barrel. This week, WTI futures closed at $57.46 per barrel on the CME/Nymex on Tuesday, Dec. 19, up 32 cents per barrel from $57.14/bbl on Dec. 12.

Crude oil prices edged higher early in the week on expectations that a United States Energy Information Administration report would show a fifth straight week of shrinking U.S. crude inventories. This was thought to be contributing to the tightening supply situation stemming from the outage of the Forties crude pipeline in the North Sea.

Oil also inched up after reports that a missile had been fired at the Saudi Arabian capital Riyadh from Yemen, but Saudi Arabia said it intercepted the missile and no casualties were reported, according to Reuters.

Nevertheless, crude gains were capped by predictions of a record increase in U.S. shale production in January, as higher crude prices encourage increased drilling.

Light Louisiana Sweet wholesale spot prices settled at $62.10 per barrel on Dec. 18, up from $63.97/bbl on Dec. 11, according to data from the U.S. Energy Information Administration.

Brent was trading at $63.80/bbl on the CME on Dec. 19, up 46 cents/bbl from $63.34/bbl on Dec. 12.

Low sulfur vacuum gas oil was at Jan WTI plus $13.50/bbl ($70.66/bbl) and high sulfur VGO was at crude plus $11.50/bbl ($68.66/bbl). In comparison, low sulfur VGO was hovering at $69.49/bbl and high sulfur VGO at $67.49/bbl on Dec. 11, 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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