An eerie quiet blanketed the U.S. base oil market this week. No fresh price hikes were put on the table – a refreshing new twist to the trend seen over the past several months, buyers noted.
Suppliers reiterated that despite a seemingly lackluster backdrop, there was plenty of behind the scenes activity underway. Customer orders continue at a robust pace, perhaps not as vigorous as witnessed in May and June, but demand is still hearty, sellers said.
In fact, some base oil buyers are seeking alternative supply sources, after experiencing difficulty obtaining additional gallons from their traditional suppliers. However, in most cases, this action is met with limited to no success, due to the ongoing shortage of availability amid depleted inventories at the producers level.
On the pricing front, consumers are relieved to finally have a respite from the rash of base oil price hikes that has dominated the market for months. The latest and most significant round of hikes totaled about 50 cents per gallon on average. That particular increase began filtering through the market in early July and has since stuck, sources said. Now both the buy and sell sides are banking on no further rounds of increases for the foreseeable future.
Meanwhile, crude values continue to retreat from their recent highs near $145 per barrel, sinking back down around $121 to $123/bbl, levels not seen since the first half of May.
Energy specialists remain at odds and are not sure which direction oil prices will ultimately head. Some suggest oil is heading back toward $70 or $80 per barrel over the coming months. Other analysts indicate that oil could still forge ahead and strive for the $150/bbl mark. The jury is out on this.
At the close of the Tuesday, July 29, NYMEX session, front-month light sweet crude futures settled at $122.19 per barrel, down a hefty $5.76 from the July 22 settlement at $127.95/bbl.
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.