U.S. base oil business was viewed as improved by many participants this week, but still off from scheduled forecasts for the 2009 spring buying season.
Depending on the segments, overall consumption was down by an estimated 10 percent to 15 percent, up from earlier estimates for some end-uses, while down for others.
Nevertheless, suppliers were pleased with the upward trend seen in customer requirements since early March. Only a few weeks ago certain sectors were reporting volumes off by as much as 35 percent to 50 percent.
For the most part, base oil prices have finally steadied alongside the slight uptick in demand, players commented. Suppliers have backed away from offering steep discounts, consumers indicated. In some cases, in efforts to move additional volumes, a seller may offer an extra 5 to 10 cents per gallon below the already established sell price for a tank truck or barge load. (In January/February, some sellers were heard to be discounting 50 cents/gal or more for spot transactions.)
In recent weeks, global base oil producers were seen issuing fresh price cuts in Europe and Asia, but so far consumers in the United States have not benefited from any further discounts since the last round initiated in early February.
Some buyers speculated that another series of discounts could be forthcoming; however, the amounts could be of lesser magnitude than the market has experienced over the course of the last six months.
In upstream news, crude oil prices moved above $49 per barrel on Tuesday during intra-day trade amid growing confidence that OPEC’s decision to ensure members comply with production quotas will support the market for crude.
Still, persistent concerns over the global financial crisis were expected to exert moderate downward pressure on prices in the coming weeks.
Members of the Organization of Petroleum Exporting Countries said Sunday they will try to closely follow the group’s current output quotas but will not make further cuts to try to prop up falling demand.
OPEC producers are convinced that to get long-term demand growth, they have to stimulate the economy with lower oil prices, some analysts suggested.
Saudi Arabia’s oil minister, however, was heard saying this week that petroleum-producing countries need a price of at least $60 per barrel to bring more energy resources to the market.
At the close of the Tuesday, March 17, NYMEX session, front month light sweet crude oil futures ended the day at $49.16 per barrel, a gain of $3.45/bbl from the week earlier settlement at $45.71. Oil prices have risen over $14/bbl from mid-Feb, when futures rested around the $35 mark.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.