U.S. Base Oil Price Report


U.S. base oil activity remained sluggish as the calendar flipped to March, but a few sellers said they see fresh signs that customer requirements are building, albeit marginally.

Most participants believe, however, that spring volumes this year will fall short compared to previous years, and most certainly sales will be significantly below those recorded in 2008.

Posted paraffinic prices are unchanged from levels announced in early February.

Sources said that, in addition to the posted price cuts regularly implemented since last October, most suppliers were maintaining temporary voluntary allowances (TVAs) of around 50 cents per gallon. Depending on the size of buyers, their TVAs could be even greater. These discounts are agreed to by suppliers, but can be removed at the suppliers discretion when deemed necessary, given market circumstances.

In the spot market, business remained slow with only a few trades heard being concluded in recent weeks. Sources said that prices for a variety of paraffinic and naphthenic grades were steeply discounted. One source said that as much as $1 per gallon less than true market values could be achieved if the buyer showed real interest.

Not all sellers were willing to participate in this type of low-ball price activity, and they have opted to keep low profiles. Most suppliers would rather offer regular ongoing buyers and/or contract customers the opportunity to take volumes at reasonable discounts.

Sources said that additive suppliers recently dropped prices by up to 6 percent for some customers. In other cases, customers received a drop of about 5 percent. These new lower prices for an array of additive packages were reportedly put into effect in mid to late February. A few buyers indicated that, although appreciative of the recent reductions, the cuts were smaller than expected, and they thought that additives prices should be discounted further.

In upstream news, oil has traded around the $40 per barrel mark since December, dropping more than 70 percent from the record high $147/bbl reached in July 2008.

Analysts expect crude will likely continue to trade in the range of $35 to $45/bbl as production cuts by the Organization of Petroleum Exporting Countries help bolster prices. The cartel has announced 4.2 million barrels per day of output cuts since September, and may add to this total when it meets Mar. 15.

Without providing details, Iran’s official news agency said Tuesday that the country’s oil minister would propose ways to boost oil prices at the meeting in OPEC’s Vienna headquarters. A spokesperson from OPEC said that the group’s compliance with the cuts stood at about 80 percent, and it was ready to slash output by another 500,000 to 600,000 barrels per day to fulfill its promise.

At the close of the Tuesday, Mar. 3, NYMEX session, front-month light sweet crude futures ended the day at $41.65 per barrel, a gain of $1.69 from the week earlier settlement at $39.96/bbl.

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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