Valero hiked its posted price for bright stock by a nickel per gallon, effective today, attributing the move to continued tightness of supply. Market sources expressed mild surprise but concurred that bright stock supply is short. They also said it is likely to remain so for the foreseeable future.
None of the other four bright stock producers in the United States had announced changes by the close of business yesterday. But Valero said it made the move because of continued tight supply on the world market and because alternative values for fuels remain high.
It is certainly true that bright stock is tight – tighter than anything else in the [base oil] market, one marketer said. On the other hand, bright stock prices just went up in March, so I am a little surprised by this.
Bright stock postings rose three times from late February to early April – twice in rounds of general price hikes, once in a round that affected ultra-heavies only. The demand-supply balance for bright stock has been exceptionally tight for more than a year. Observers attribute the situation to a slide in U.S. output over the past several years – due to the closing of Group I plants – and to a slowdown in imports from Brazil and Taiwan.
Some said there is a good chance the situation will deteriorate before it improves. They noted that base oil supply continues trending toward more highly refined stocks, and that technologies producing them generally do not make bright stock. Meanwhile, bright stock demand for applications such as industrial lubricants, marine oils and grease remains strong.
There is definitely a very pressing situation with the availability of bright stocks in the near future, said Geeta Agashe, director of the Petroleum and Energy practiceof Kline and Co. The Little Falls, N.J., consulting firm announced yesterday that it willconduct a study of the bright stock market targeted for release next January.
The price of crude on the New York Mercantile Exchange closed yesterday at $52.13 per barrel, $2.46 higher than a week ago.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.