Quiet but steady characterizes the U.S. base oils market as it heads into end of April. There have been no recent posted price movements, and the supply/demand scenario is largely balanced.
Generally the market has steadied, according to various sources. Customer orders are now at levels many suppliers would expect, especially considering the estimated 20 percent to 30 percent drop in requirements that was already established earlier this year.
There was an uptick in sales several weeks ago, but that increased activity has since leveled out. Sellers anticipate that consumers off-take has reached its seasonal plateau and should remain there until the normal summer slowdown kicks in, which usually begins in July.
Regarding market prices, buyers have acknowledged that steep discounts, offered by some sellers in the first quarter, have since subsided. In many cases, suppliers have also removed temporary voluntary allowances (TVAs). A few contract consumers said that agreed-upon prices have most likely bottomed out for now. But if crude oil values continue to slide, there could be a fresh round of posted price decreases to follow, they added.
In the case of pure spot trade for bright stock, an associated price was pegged around $1.65 to $1.80 per gallon FOB in February-to-early March, but values have steadily edged higher to around $2.50/gal FOB for current trade. Contract and regular ongoing business for bright stock, however, is being concluded at much firmer levels of around $2.75 to $2.90/gal FOB depending on application, sellers and buyers confirmed.
Other API Group I and II paraffinic business has also seen some improvement in price, with an average level encompassing light, mid and heavy vis grades noted to be in a span of $1.65 to $2.50/gal FOB. Sources indicated that a buyer could add about 30 to 50 cents/gal to this range for Group III base oils.
Naphthenic prices are also found in a wide range of $1.70 to $2.70/gal FOB, depending on pale oil and end use. Some applications are paying slightly lower prices, while other segments are fetching higher numbers, sources claimed.
Not only did domestic sales show some improvement in late March and into April, the offshore arena has also perked up, with a rash of fresh inquiries heard to be on the books. There are a number of tankers on the ready for late April loadings out of the Gulf and East Coasts. Several other ships are expected to load in May as well. Shipments over the nextone to five weeks are heading to various deep-sea destinations; the total volumes are made up of several grades and add up to about 30,000 tons, if fixed.
Looking upstream, the crude oil market has encountered downward pressure stemming from the swine flu epidemic.
The global economy has been struggling to pull out of a recession, and an outbreak of swine flu is now threatening to slow recovery even further. On Monday, the World Health Organization raised its alert level from three to four on its six-level scale.
If the outbreak becomes a widespread pandemic, the travel industry – and demand for jet fuel – will take a hit, further crippling already weak demand for crude oil, analysts said.
At the close of the Tuesday, April 28, NYMEX session, light sweet crude futures ended the day at $49.92 per barrel, a gain of $1.37 compared to the week earlier settlement at $48.55/bbl.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.