There were no big surprises in the U.S. base oil market this week. Thin participation alongside slow activity is typical following the Labor Day holiday, which marks the end of the summer vacation period.
On the paraffinic side, demand has been fairly sluggish for many grades and for several months, despite a few momentary blips of improvement during the summer. Producers said they are hopeful that business will resume a more normal pace in the next few weeks.
A few sellers said that interest for heavy vis and bright stock has been decent, in fact better-than-expected in many cases. But sales for light-vis grades have been slim, they lamented.
Paraffinic price ideas are holding mostly steady in spite of poor sales for the lighter neutrals. Sources indicated that there could be extra discounts on offer, perhaps in the way of temporary voluntary allowances (TVAs) or as additional incentives to attract buyers into taking more volumes. But generally, prices remain stable at unchanged levels, they noted.
One seller pointed out that bright stock values are very firm due to solid demand seen for this grade for months. Most suppliers have low stock levels and are not seeking out spot opportunities. Several other sellers added that they would not have surplus bright stock until late October.
Naphthenic demand has proven to be more robust than paraffinic buying interest. Many pale oil producers have pushed up prices in recent weeks while keeping up with improved sales amid thinning inventory positions. However, only Nynas issued a formal notice on prices, advising that it would increase Pale 500 and heavier grades by 20 cents per gallon, effective Tuesday, Sept. 8.
Looking at upstream and surrounding market news, firmer energy prices emerged along with a more positive outlook concerning the state of the economy.
Crude oil futures sprang well over the $71 per barrel mark on Tuesday during intra-day trade and left the ca.$68/bbl settlements, seen every day since Sept. 1, in the dust.
But whether oil values can be sustained at $70-plus/bbl remains to be seen; some analysts expect prices eventually to fall this month as demand for crude wanes.
At their Sept. 2 meeting in Vienna, leaders of the Organization of Petroleum Exporting Countries indicated that they plan to keep output levels unchanged. If that happens, oil prices could trend lower, as traders believe that OPEC members more and more may produce above their official quotas.
News about corporate takeovers in the overseas markets is making investors more optimistic about the economy and giving them new reasons to buy stocks, said analysts. The Dow Jones Industrial Average neared 9,500 points on Tuesday. With the exception of five days in late August, the Dow had not reached that level since October 2008. Even so, it remains well below the record highs of over 14,000 achieved in October 2007.
At the close of the Tuesday, Sept. 8, NYMEX session, front-month light sweet crude futures ended the day at $71.10 per barrel, a gain of $3.05 from the Sept. 1 settlement at $68.05/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.