U.S. Base Oil Price Report


This week ushered in the annual NPRA International Lubricants and Waxes meeting in Houston. With many base oils participants traveling for the event and other industry-related activities, the marketplace was left somewhat hushed.

The main issue now grabbing the attention of market players is that high crude values — still hovering around the $80 per barrel mark — have led to no price announcements by any major producers. Earlier this month, Valero and Calumet raised their paraffinic postings by 25 cents to 30 cents per gallon, but market watchers are mystified that the likes of ExxonMobil, Motiva, Chevron, ConocoPhillips and Flint Hills have not issued any price moves. The last complete round of hikes by all paraffinic producers was initiated in early July.

By contrast, within the first nine days of November all naphthenic producers bolstered pale oil prices by 25 cents/gal, for all cuts. The increases were based on rising crude and feedstock costs, producers said.

For now, and most likely because large paraffinic producers have not adjusted base stock postings amid depleted margins, buyers say that suppliers are standing firm on current offers. There is minimal or no competitive discounting being given by sellers, and in many cases, producers have removed temporary voluntary allowances (TVAs), sources disclose.

Meanwhile, the market appears cohesive in that supply/demand fundamentals are largely balanced. Suppliers concur that contractual sales are largely on target and in some cases even better than expected, noting an uptick in buying interest some weeks back.

Buyers reiterate that there is no absence of spot availability, particularly for light-vis grades, while all contract requirements are being satisfied promptly and without any delayed deliveries.

Both the sell and buy sides agree that some mid- and most heavy-vis grades as well as bright stock continue to be tight and are more difficult to obtain on a prompt and/or spot basis.

Despite sales having picked up during the latter part of the third quarter, base oil producers had already throttled back production in attempts to keep supply/demand in balance. U.S. Department of Energy data suggest that most key production sites were operating at around 75 percent of capacity at best in the past several months. But the DoE data also reveal that U.S. plants ran between 60 percent and 70 percent of capacity between January and June.

In industry news, Valero is planning a three-week shutdown for general maintenance at its Paulsboro, N.J., facility, commencing in mid-December. The plant is expected to resume normal operation in early January. There are a number of other planned outages during first-quarter 2010, but details are vague at this time.

Upstream, crude oil prices have more than doubled from a low of less than $33 per barrel touched in December 2008, although they are still barely half their highs of around $147 reached in July of that year.

Some analysts were heard attributing the recent rally for crude to long-anticipated signs of improvement in oil fundamentals, in the context of generally constructive economic data. They added that strong emerging market demand has pulled oil supply elsewhere, reducing U.S. petroleum imports. Specifically, Chinese oil demand continues to surge, driven by strong economic activity.

At the close of the Tuesday, Nov. 10, NYMEX session, light sweet crude futures ended the day at $79.05 per barrel, edging down 55 cents from the settlement reported one week earlier at $79.60.

Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.

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