The U.S. base oil market scrambled to redefine pricing normalcy this week. The shuffle between the buy and sell sides followed the round of price cuts initiated by producers within the last few weeks.
Whether another price decrease could emerge soon was questionable, sources said. Some buyers indicated that there is still room for a further downward adjustment to postings, given abundant supply and sluggish demand.
A few market watchers suspect that a number of producers have been and may still be operating at a loss, with negative margins. In addition, many production sites are being run at reduced rates to help keep the supply/demand situation better balanced, according to producers.
Spot prices for Group I and II base stocks are heard in wide ranges. Light viscosity grades consisting of 100, 150 and 200 neutrals are pegged around $1.60 per gallon to $1.75/gal FOB. Mid vis paraffinic oils hold a slight premium of about 5 to 10 cents/gal, or around $1.65/gal to $1.85/gal FOB. Heavy neutral prices are similar, perhaps slightly higher, around $1.70 to $2.05/gal FOB. Average-size parcels (1,200 to 2,000 tons for domestic sale or 3,500 to 5,000 tons for export) can include a mix of grades and may have a single negotiated price. Prices vary depending on timing and volume.
Bright stock demand is improving, but sources say that there remains more-than-adequate supply. In recent weeks, sellers said that bright stock offers have edged higher for spot trade. Current offers are heard anywhere from $2.10/gal to $2.50/gal FOB. This range is about 25 to 40 cents/gal firmer than values for bright stock trade concluded three to four weeks ago.
For regular long-term and contract business, prices for all grades are an estimated 25 to 40 cents/gal higher than spot. But the wide price gap between spot and contract is slowly narrowing, say suppliers. Players also noted that in many cases, temporary voluntary allowances – TVAs – were removed or sidelined when producers dropped postings.
The naphthenic sector is perceived as steady, with demand generally stable and inventory levels satisfactory for all pale oils. Prices from $1.65 to $1.95/gal FOB are said to be indicative for most grades. There are exceptions, and in some cases prices are firmer at $1.75 to $2.25/gal, while in other situations, slightly lower numbers are applicable, depending on grade and end use.
In upstream news, low sulfur vacuum gas oil (VGO) values were near $1.32 per gallon for either barge or cargoes earlier this week. May crude oil values inched to the $53 per barrel level during the past several days of trade, but lost ground when the stock market also tumbled lower. Outer month futures contracts placed crude prices around $57 to $60/bbl.
At the close of the Tuesday, April 7, NYMEX session, light sweet crude futures ended the day at $49.15 per barrel, a loss of 51 cents from the settlement reported one week earlier at $49.66.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.