With the fourth quarter just getting underway, a whiff of optimism is detected in the U.S. base oils market. A growing number of participants from both the buy and sell sides are now anticipating the year could end on a more positive note compared to their expectations a few months back.
Both the paraffinic and naphthenic sides had a rough patch during the first half of this year with very low sales amid poor demand. But it now appears the pendulum has swung, and fresh confidence is found among base oils players.
The naphthenic sector experienced an upturn in sales starting in mid-to-late summer, and the healthy trend continues, pale oil providers proclaim. In fact, in many cases, naphthenic producers are sold out on a number of cuts through December/January.
The paraffinic arena had greater challenges, as sales of light and mid vis grades languished for months, sources said. But in recent weeks, demand has improved. Now, suppliers are seeing a build in customer contract orders along with new spot domestic and export opportunities for neutrals 100, 150, and 200 through 300 vis grades.
Demand for heavy neutrals and bright stock has been largely constant though over the last six months, with many paraffinic producers also in sold-out positions for these grades.
In related industry news, the recently announced alliance between Calumet and Houston Refining LP, a wholly owned subsidiary of LyondellBasell (see full story in this weeks issue), has most naphthenic participants trying to understand the full impact and consequences which may come out of this newly formed union. Meanwhile, Nynas, who had been the long-term marketer for Houston Refining and its naphthenic base oils, will remain committed to the specialties markets. Nynas is also in the midst of launching its new naphthenic bright stock products, which the company expects to be a successful venture.
Upstream, crude oil values have bounced around the $70 per barrel mark for several months in the wake of traders and investors struggling to gauge how strongly the U.S. economy will recover. Poor jobs and manufacturing data undermined optimism last week in the futures market. But earlier this week the Institute for Supply Management said its service index showed that sector grew in September for the first time since a year-ago August.
Energy experts and analysts in Europe and the United States have attributed the recent upward trend to the more encouraging U.S. service sector data and a weaker dollar. They also speculate that if the dollar remains soft – its down 10 percent against a basket of foreign currencies since March – it could lead to higher crude prices in the near future.
At the close of the Tuesday, Oct. 6, NYMEX session, light sweet crude futures ended at $70.88 per barrel, a sizeable gain of $4.17 compared to the week-earlier settlement at $66.71/bbl.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.