Calumet confirmed its plans to lift all naphthenic oils prices by 10 cents per gallon effective August 13. The increase initiative followed other major naphthenic producers who had recently announced price hikes of between 10 and 15 cents/gal. Effective dates were staggered during the first half of August.
The situation driving prices higher was two-fold. Demand was certainly a key support factor, but rising operating costs and squeezed margins also had a significant impact, leading producers to take this price action.
Pale oil buying interest remained strong, particularly for light viscosity grades. Most suppliers were finding it challenging to satisfy all customer demand for pale 60. In most cases only historical volumes could be filled.
However, there are several long-term offshore deals ongoing, which include pale 60 among a few other grades, making up parcels averaging 2,500 to 4,000 tons. Otherwise, and depending on grade, pure spot trade was limited.
The paraffinic side of the market remained fairly quiet during the week ended August 8, with demand on par with late summer expectations. Sellers anticipated that customer orders would pick up late this quarter.
The U.S. bright stock supply outlook was deemed gloomy by most suppliers this week. There was ample supply of this heavy viscosity paraffinic grade, but the opportunities to ship surplus volumes offshore have narrowed in recent months, suppliers said. (Cargoes of U.S. bright stock typically find themselves heading into India or Africa.)
Meanwhile, as bright stock supply swelled in Europe amid plunging export prices in recent months, suppliers in northwest Europe and the Mediterranean have seized the chances to ship additional cargoes to India and Africa at steeply discounted prices.
This activity has caused a buildup in the U.S. supply chain.
On a more positive note, a key and obvious outlet for U.S. suppliers to sell bright stock is the Mexican market. Unfortunately, price ideas were eroding, sellers said. Several barges and rail cars were reportedly fixed this week for discharge in Brownsville, Texas. Prices were pegged near the $2.65 to $2.70/gal FOB range. A few other deals were completed on a delivered basis at numbers heard to rival FOB numbers.
Conversely, in the domestic contract arena, where about 70 to 80 percent of the overall output of bright stock is placed, values were holding steady. The 10 cents/gal increases initiated in mid-to-late July were said to have stuck and without much resistance from consumers. Current price ideas were pegged in a range of $3.35 to $3.50/gal.
Crude closed Tuesday at $72.42 per barrel on the NYMEX, down $5.79 from a week ago. An industry analyst described it as a fickle market, noting that the market hit almost $79/barrel this past week, a record, and has now lost almost $6. Its not due to fundamentals, he said, but rather to hedge funds getting out of the market. Another week, who knows?
Base oil pricingeditor Carolyn Green, based in Houston, can be reached at carolynlgreen@gmail.com.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.