In advance of the long U.S. Thanksgiving holiday commencing Thursday, base oil market activity grew quiet as many participants stepped away from the workplace early.
In a move that was largely anticipated by the market, Calumet said it lowered its line-up of paraffinic posted prices, reducing all grades by 30 cents per gallon, effective Nov. 19. The decrease in postings was due to current market conditions, the company said. Calumets move followed a similar adjustment made by Valero the previous week.
Sources were quick to suggest that both companies found no support for higher prices to materialize, particularly since the larger producers had not attempted to hike prices during the same time frame. The last significant round of hikes was initiated in July.
Sources went on to say that it was more surprising that major producers had not increased postings given deteriorating operating margins. Crude oil prices, along with key feedstocks, have rallied over the past three to four months, and now stand at about double the levels they were at the first of the year.
Why base oil posted prices have stalled is not clear, one source said, as demand has been fairly decent in recent months. Sellers, in an attempt to keep prices from sinking lower, have not been willing to discount certain grades, the source added.
In fact, many suppliers have been attempting to raise spot offers gradually over the last three to four months, while also trying to curtail any other market-type discounts that are at times applied to regular ongoing and contractual business. In many cases, temporary voluntary allowances (TVAs) have been successfully removed.
There continues to be steady buying interest for heavier vis grades, especially on the naphthenic side of the market. Suppliers said that tire and rubber manufacturers have shown increased demand in the past few months for Pale 2000. Several suppliers contend that they are in sold-out positions for that particular grade and cannot entertain pure spot opportunities.
Meanwhile, demand for light-vis paraffinic and naphthenic grades has hardly improved. There are rumblings that a few sellers are still pushing their customers to off-take light vis product along with regular shipments of heavier grades.
A few market watchers surmised that consumers are unwilling to build up stock positions, especially for light vis material. In most cases, consumers are trying to work off existing volumes and are buying only specific grades when necessary.
At the close of the Tuesday, Nov. 24, NYMEX session, light sweet crude futures ended at $76.02 per barrel, down $3.12 from the week-earlier settlement at $79.14/bbl.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.