The U.S. base oil market seems to have fallen into a brief winter slumber, following a tumultuous succession of price adjustments undertaken in November and December on the back of plummeting crude oil values.
Base stock prices continue to be exposed to downward pressure because of the continuous volatility in crude oil and feedstock costs, and buyers are well aware that base oils could be subject to further price revisions.
As a result, most sellers report that consumers have been discussing prices and market conditions, but are delaying purchases given ample supply and concerns that prices may drop once again. Suppliers also said that this scenario is not likely to change much until February.
Activity on the export market has been fairly subdued as well, not only because of the year-end holidays, but also because global demand for base oils has been sluggish.
There were reports of buying interest from Egypt for a bright stock cargo, while discussions with Mexican buyers have been ongoing, but have not led to concluded deals, sources commented.
On the naphthenic front, fundamentals were largely unchanged, with demand lacking vigor, and prices also expected to remain vulnerable to possible drops in the crude oil arena.
A number of producers may take advantage of the slower time of the year to complete maintenance programs, and some facilities could also shut down on account of inclement weather conditions in the next few weeks, which would partially reduce the supply overhang.
Cross Oil is planning to shut down its 5,000 barrels per day naphthenic base oil plant in Smackover, Ark., for two weeks during the first quarter.
Upstream, crude prices are expected to remain volatile until production is curtailed, which is likely to happen only when some of the less profitable drilling operations shut down, or some of the refiners run out of tank space, sources said.
West Texas Intermediate crude futures fell below $50 per barrel amid speculation that U.S. inventories will continue to grow, exacerbating the current global supply glut.
WTI settled on the CME/Nymex at $47.93 per barrel on Jan. 6, down $6.19 per barrel from a settlement at $54.12 per barrel on Dec. 30.
Brent crude was trading around $51.10 per barrel on the CME on Jan. 6, down $6.78 per barrel from $57.88 per barrel a week ago.
Gabriela Wheeler can be reached directly atgabriela@LubesnGreases.com.
U.S. posted paraffinic base oil prices, as reported each week in Lube Report from Jan. 2004 to the present, are now available in Excel format. Seewww.BaseOilPrices.com.