Naphthenics have been the more stable side of the U.S. base oil market in recent months but suppliers said there are signs that price cuts could be looming.
While paraffinic base oils underwent two rounds of price reductions between mid-October and early December, naphthenic suppliers got by with just one 5-cent cut in early November. Refiners said supply constraints allowed naphthenic prices to hold up despite lower demand and the diminishing spread between naphthenic and paraffinic stocks. Supply tightened when the 5,300-barrel-per-day Golden Bear refinery in Bakersfield, Calif., was closed during the summer after Ergon Inc., San Joaquin Refining Co. and Tricor Energy bought it in a bankruptcy auction. In addition, Calumet Lubricants Co. backed off plans to increase naphthenic production at the Shreveport, La., refinery it bought in May from Pennzoil-Quaker State.
Still, suppliers said they see signs that prices may now be ready to fall.
Weve been pretty fortunate so far, one Midwest base oil marketer said. In the last couple weeks though, weve seen some pretty quick erosion of spot prices – about 15 cents per gallon – and I think that probably signals that were in for a round of cuts.
A Western marketer, however, contended that prices may hold awhile longer yet in that region.
We see what may be a temporary imbalance between supply and demand in this part of the country, he said. Its partly due to the shutdown of Golden Bear. But we also think that suppliers have yet to recoup losses they absorbed when crude oil jumped so much. Plus, were still priced lower than paraffinic so customers dont have much alternative.
Historic U.S. posted base oil pricesand WTI and Brent crude spot prices are available for purchase in Excel format.
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