Status quo market conditions prevailed in the U.S. base oil market this week, sources said. The pricing front saw no immediate or drastic changes, and fortunately no news of unplanned operating disruptions emerged.
There are, however, a number of planned shutdowns currently under way, but supply partners are cautiously optimistic that these scheduled outages will not result in any unforeseen production issues.
Most agree, at least for now, the supply/demand picture is well balanced.
The only curveball that might change the otherwise stable base oils arena could be an unwanted round of price hikes due to rising upstream costs, consumers speculated. As crude values and subsequent vacuum gas oil prices stiffen, base oil producers could potentially be encouraged to initiate posted price increases,buyers worried.
Upstream volatility continues to capture the attention of some base oil participants. Crude values have been teetering on either side of the $80 per barrelmark for about a month. More recently there have been indicators which point to crude prices possibly moving even higher. Some analysts expect to see crude numbers escalate to $85 to $90 per barrel within the coming months.
Traders are on pins and needles because there are bearish and bullish traps, said one energy consultant. Prices have come down quite a bit recently but may reverse at any moment. If interest rates are cut and the dollar falls, crude oil will be right off to the races again.
In other news, Chevron announced yesterday that it is exporting Neutral Base Oils 100R, 220R and 600R plus unconventional base oils 4R and 7R from its refinery in Richmond, Calif., to its terminal in Antwerp, Belgium. The first shipment arrived Oct. 2. According to Alan Outhwaite, manager of base oil business development for Chevron Global Base Oil, Group II will bring relief and opportunity to lubricant blenders in Europe. We anticipate that Group II will become a staple for European lubricant manufacturers, he said.
At the close of yesterdays NYMEX session, light sweet crude settled at $80.26 per barrel, up 21 cents/bbl from a week earlier.
Carolyn L. Green, based in Houston, can be reached directly 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.