Player anticipation is on the rise heading into the start of the fourth quarter as both sides of the U.S. base oils market anxiously await how activity will pan out for the duration of 2009.
For now, market fundamentals were described as balanced again this week, continuing a trend that has been in place for a month or so. No changes to posted prices or supply/demand conditions were noted.
Although general price ideas were stable, there were some comments from a handful of buyers about waning crude oil values, which have shed several dollars in recent days. They wondered if producers could be contemplating issuing posted price decreases if upstream costs continue to move lower.
Producers were tight-lipped regarding prices and whether postings may or may not be adjusted down. They reiterated, however, that demand for a number of grades remained strong, and current price levels were steady.
Other U.S. sellers went on to say that export opportunities have resulted in higher prices compared to some domestic trade due to improved offshore demand. Strong buying interest from Mexico, South America, Europe, Africa and Asia is calling not just for heavy neutrals, for but light and mid vis grades as well.
Meanwhile, crude values have eased by an average of $3 per barrel during September, at one time peaking near $73/bbl and dipping to $65/bbl. For much of the month, however, futures prices held around $71/bbl, a level comparable to the August median.
Helping crude prices move lower this week was a fresh attitude toward the Iranian nuclear program. Some traders speculated that even if the U.S. does get into a heated discussion with Iran, a possible disruption in oil supplies would be unlikely. Investors have since turned their worries to waning energy demand as the market heads into its softest season of the year.
Energy market watchers will be keeping a close eye on the upcoming release of U.S. inventory levels of crude oil and petroleum products, due later this week. Stockpiles of crude, gasoline and heating oil have been growing, raising concerns about energy demand.
Other reports due out on Friday include updates on jobs, home prices, manufacturing, construction spending, and factory orders, which should also impact the direction of oil prices, acknowledged analysts.
At the close of the Tuesday, Sept. 29, NYMEX session, front month light sweet crude futures ended the day at $66.71 per barrel, shedding $4.84 from the Sept. 22 settlement at $71.55/bbl.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.