Following increases implemented by a majority of paraffinic and naphthenic base oil producers, pricing activity has quieted down, although there was some talk about emerging downward pressure on the spot front.
Most paraffinic suppliers raised posted prices of API Group I, II and II+ base oil cuts by 10, 19 and 20 cents per gallon during the first half of the month – depending on the supplier – while naphthenic producers also implemented price hikes of 15 cents/gal between Sept. 28 and Oct. 4.
These hikes were largely fueled by escalating crude oil, feedstock and transportation costs in late September and early October.
However, crude oil prices have since retreated from their lofty levels above $70 per barrel, and some of the pressure has been lifted.
While contractual base stock requirements were deemed generally steady, some downstream segments have started to weaken as expected for the last quarter of the year.
Sources said that base oils moving into the domestic passenger car motor oils business were facing downward pressure, with demand for these cuts softening on account of sluggish consumption and strong price competition on the finished lubricants side.
The weakening base stock requirements have resulted in a surplus of several grades, which suppliers were trying to place overseas, including the Middle East, sources said. However, demand in other regions has been lackluster as well, and spot prices have come under pressure.
Lower feedstock prices also impacted overseas sales volumes, as consumers prefer to hold off on purchases in hopes of lower base oil pricing in coming weeks, particularly as they perceive the market to be slightly long. Buyers “are always hoping a drop in crude pricing will lead to lower base stock prices, so they patiently wait,” a market source noted.
Crude oil futures plunged on Tuesday as Saudi Arabia pledged to raise output, amid the continuing international controversy over the disappearance of Saudi journalist Jamal Khashoggi. Analysts said that increased Saudi production would help offset the impact of U.S. sanctions on Iran, which are due to go into force next month.
Expectations of higher crude oil stocks in the United States also added to the bearish tone in the market.
On Tuesday, Oct. 23, West Texas Intermediate October futures settled at $66.43 per barrel on the CME/Nymex, down $5.49/bbl from $71.92/bbl on Oct. 16.
Brent was trading at $76.44/bbl on the CME Tuesday afternoon, and had settled at $81.41/bbl on Oct. 16.
Light Louisiana Sweet crude wholesale spot prices settled at $77.45/bbl on Oct. 22, compared to $79.47/bbl on Oct. 15, according to the U.S. Energy Information Administration.
Low sulfur and high sulfur vacuum gas oil remained at parity at Nov. WTI crude plus $14.50/bbl ($83.67/bbl). By comparison, low sulfur VGO was hovering at $88.78/bbl and high sulfur VGO at $87.78/bbl on Oct. 15, according to data published by PetroChemWire.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase inExcel format.