A more positive supply/demand picture emerged in the U. S. base oils market this week, as buyers stepped out with improved orders for a number of paraffinic grades. Suppliers, concerned about stagnant sales, were pleased to see buying interest rise.
If this current trend continues, the market could expect a much tighter supply situation to materialize during the fourth quarter. This would be contrary to what some players had speculated to be the case just a month ago, when they suggested that the market would be awash with light ends.
Already, bright stock and heavy vis neutrals are difficult to source on a spot basis, and most producers anticipate that there will be limited trade of these grades over the next few months.
But the more impressive change, sellers say, is the fresh interest seen for some of the lighter vis grades. For most of the summer, sales for 60 through 300 vis grades fell well below previous years requirements. Due to meager customer off-take during the May to August time frame, producers reduced operating rates in efforts to avoid top-heavy tanks.
Moving forward, with fairly balanced inventories of all grades now, and seemingly robust demand, the year could end on a happier note compared to many other past disappointing year-ends, producers admitted.
A number of suppliers revealed that parcels of bright stock and heavy neutrals are going out the door at satisfactory price levels around $2.80 to $3.05 per gallon FOB. Buyers also confirmed that these levels have been achieved, but they added that it is difficult to obtain extra barrels at any price.
As mentioned in previous weeks reports, the naphthenic market saw a dramatic uptick in demand starting in August. Pale oil suppliers recently upped all cuts by an average of 20 cents/gal. Producers also removed temporary voluntary allowances (TVAs). So far, steeper prices are holding firm while demand remains healthy, sellers said. In many cases, naphthenic producers are in sold-out positions for heavy pale oils (500 vis and higher) through this year and cannot entertain any new spot business opportunities.
At the close of the Tuesday, Sept. 22, NYMEX session, light sweet crude futures ended at $71.55 per barrel, a gain of 62 cents over the Sept. 15 settlement at $70.93/bbl.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.