U.S. base oil market conditions were already considered to be difficult given the past several months of climbing feedstock costs alongside a quiet posted-price front. But the most recent news to hit the market was largely unexpected, with few buyers prepared to hear of price decreases.
During the past week, Valero alerted customers that its Nov. 2 posting hikes were no longer in effect. The company chopped all neutrals grades by 30 cents per gallon while decreasing its bright stock posted price by 25 cents/gal, effective Nov. 11.
Valeros decision to reduce prices was based on the lack of support by other producers who have not adjusted postings since July. The exception is Calumet, which raised its lineup of paraffinic grades by a flat 30 cents/gal on Nov. 6. As of yesterday, Nov. 17, there was no news from Calumet of any change.
Despite margins being increasingly squeezed, a widespread posted price increase has yet to materialize even though a number of consumers have been anticipating such a move for some months.
Since the July round of price increases was successfully implemented, crude oil prices have escalated by an estimated $10 to $15 per barrel. Meanwhile, overall producers stock positions are presently better balanced due to improved demand since early August, according to sources.
Heavy end neutrals continue to attract more buying attention, but there has been a marked improvement for light vis grades too, sellers contend.
As previously reported, quarterly Department of Energy data revealed that U.S. base oil facilities had been running well below capacity for much of this year, at circa 60 percent to 65 percent.
Sources attest that output was initially curtailed due to below-normal customer requirements for the first half of this year. Since August, however, plants have operated at slightly higher rates, at about 75 percent of capacity.
With the Thanksgiving holiday fast approaching, followed by an array of year-end festivities, the market is expected to fall fairly quiet. Many players are eagerly awaiting the New Year in hopes of seeing a return to a more normal set of market circumstances compared to this year.
At the close of the Tuesday, Nov. 17, NYMEX session, light sweet crude futures settled at $79.14 per barrel, a marginal gain of 9 cents compared to the $79.05/bbl close reported one week earlier.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.