Citgo lowered its posted price for bright stock by 5 cents per gallon today, completing a round of cuts for the paraffinic heavy that began two weeks ago. Base oil postings were otherwise unchanged in the face of persistently high crude oil costs.
Meanwhile, a source said the ongoing strike at Petroleos de Venezuela has driven some Latin American blenders to seek base oil in the United States, and that interest will likely increase if the work stoppage continues.
Citgo, which is owned by PdVSA,was the last principal Group I base oil refiner to reduce its bright stock price this month. Valero and Sunoco imposed identical cuts after ExxonMobil surprised the market with a 5-cent cut Jan. 13. Many buyers and sellers had looked for base oil prices to rise because of the December run-up in crude costs.
Bright stock has been out of sync with the rest of the market since summer, when it was left out of two rounds of price hikes. Sources say the material was clearly in oversupply late last year, with spot sales taking place at prices significantly below postings and shipments being sent overseas. After the recent price cuts, however, marketers seem to agree that bright stock may be ready to fall into line.
Bright stock was very, very messy in November and December, one marketer said. But now spot prices are coming up and [Shells] Deer Park [Texas refinery] is going to be taken out of the equation. I think the bright stock market is basically fixing itself. Shell plans to close the Deer Park base oil plant, which produces paraffinic and naphthenic base oils,at the end of March.
Many buyers and sellers continue to predict that high crude costs will trigger base oil price hikes. Crude prices on the New York Mercantile Exchange rose 38 cents yesterday to close at $32.67 per barrel.
The spike in crude has been attributedlargely to the seven-week strike at PdVSA, which reduced supply from the worldsfifth-largest oil exporter. The strike has also thrown a kink into the supply of base oil for South and Central American lubricant blenders, since PdVSA is a major refiner of paraffinic stocks for the region.
U.S. base oil marketers have generally reported no significant increase in business from Latin America, but one marketer said a Brazilian company made a purchase this week. The same marketer added that Citgo, a U.S. subsidiary of PdVSA, has helped to meet some ofits parents base oil obligations. Blenders have also made spot purchases from Europe and from other Latin American suppliers, such as Argentinas YPF-Repsol, he said.
I think the situation in Venezuela hasnt played itself out yet because there was a lot of [base oil] inventory built up in advance of the strike, the marketer said. But if the problem continues, I think you will see more purchases being made out of the U.S.
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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