As December gets underway, demand is steady in the U.S. base oil market, alongside fairly balanced inventory positions, while price ideas are holding firm, buyers and sellers say.
In many cases, producers as well as other suppliers said that orders are on target. But they were quick to point out that December activity will likely slow to a snails pace ahead of year-end festivities.
For now, players from both the sell and buy sides agree that the past few months were greatly improved compared to the lack of activity seen a year ago.
One supplier said that market performance was miles ahead of November-December 2008, when demand had largely disappeared and remained void through the first four-to-six months of this year.
Meanwhile, base stock price ideas, although unchanged, are subject to upward pressure due to steep operating costs. Producers acknowledge that margins are suffering as feedstock costs have steadily edged higher since August.
Despite ever-narrowing margins, a widespread price-hike initiative by paraffinic producers has yet to materialize, with the last round of increases successfully pushed through in early July.
Buyers suspect that prices will hold at unchanged levels at least through this month. They suggest that December is often an unpredictable month, and a time when suppliers are eager to move surplus material at discounted prices.
Sellers, however, indicate that since inventory positions are better balanced than normal heading into year-end and demand has been steady, fire-sale prices are highly unlikely.
In industry news, a previously planned mid-December outage for general maintenance at the Valero Paulsboro, N.J., facility has been cancelled. The plant has been and will continue to operate at normal rates for the foreseeable future without interruption.
Looking upstream, crude oil values rallied back around the $78 per barrel mark on Tuesday after dipping to around the $75.50/bbl last week. Oil prices hit a high of $81 earlier in November, but the price held on average nearer the $78 to $79/bbl level. The slip in energy futures values last week was mostly blamed on the Dubai crisis, which also caused the stock markets to plunge. News from Dubai early this week was more promising, however, causing the both oil and stock markets to rebound.
Crude values also gained added support from a Chinese industry group that said manufacturing activity expanded in November, marking a ninth straight month of growth.
At the close of the Tuesday, Dec. 1, NYMEX session, light sweet crude futures ended the day at $78.37 per barrel, a gain of $2.35 over the week-ago Nov. 24 settlement at $76.02/bbl.
Carolyn L. Green, based in Houston, can be reached directly at carolynlgreen@gmail.com.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.