Overall demand for base oils in the U.S. is described as picking back up, after nearly grinding to a stop from late June to mid-July.
Sources from both the paraffinic and naphthenic sectors said that orders have improved. The outlook for the coming months appeared optimistic, projecting that sales will grow steadily.
Although still well below volumes achieved in past years, several segments, including metalworking and rubber-related uses, have seen marginal growth, and this trend is expected to continue. Even demand for finished packaged goods has regained a steady pace as well.
Sources have heard that independent blenders and packagers as well as at least one major, Shell, are seeking increases of 40 cents to 60 cents per gallon on some finished lubricants, including passenger car motor oils and automatic transmission fluids, effective mid-September to early October.
Despite the just-completed round of posted base oil price hikes in the paraffinic arena, the last price movement in the naphthenic sector was in the early part of June, when producers pushed up all grades by 20 cents per gallon. There is market talk that if crude runs back up to the $70-per-barrel level, producers would be inclined to issue increases for all pale oils.
The recent revival in stock market indices as well as a generally more positive stance on Wall Street, along with other encouraging news indicating that the economy continues to show signs of improving, seems to have stimulated the base oils market, sources said.
During a congressional session on Tuesday, Federal Reserve Chairman Ben Bernanke repeated that the economy should start growing again in the second half of this year, but he warned that growth would be slight and could lead to even greater unemployment. However, Bernanke went on to say that despite moderate improvement seen in consumer spending and fewer declines in the housing sector, the economy remains vulnerable.
On Tuesday, crude oil values broke through the $65-per-barrel mark during intra-day trade, although moderated from that peak later in the session. Oil prices gained support from better-than-expected second quarter company earnings, suggesting that the U.S. economy will recover from its worst recession in decades, analysts said.
At the close of the Tuesday, July 21, NYMEX session, front-month light sweet crude futures ended the day at $64.72 per barrel, a sizeable gain of $5.20 compared to the July 14 close at $59.52/bbl.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.