The Summer Olympics have come and gone, and numerous athletes are sure to leave Rio de Janeiro with an extraordinary sense of accomplishment, while others may depart the exotic location with a certain degree of disappointment.
Although they will not be hit by the same highs and lows as these Olympians, participants in the base oils and lubricants industries may also experience positive and negative feelings as the summer season starts to wrap up.
Concerns over a change in fundamentals have emerged, with volatile crude oil values driving buyers to show some restraint when ordering fresh base stock volumes.
Sellers continue to report a steady stream of orders, but a few consumers, brokers and traders are hesitant to jump at offers of large cargoes because they worry – or hope – that base oil prices could slip in coming weeks.
Refiners can be expected to fend off posted price decreases as long as possible, arguing they are still trying to recover from lean margins earlier this year.
Despite the fact that base stock prices increased in May and June – and the latest drops in crude values have helped strengthen margins – sources on both paraffinic and naphthenic sides noted that there is still a need for improvement.
At this writing, postings have maintained stable levels since early to mid-June when the most recent round of price increases was implemented, and some of the stability is attributed to fairly snug supply for most grades.
The heavy viscosity cuts are the tightest, while mid- and light-vis grades are generally showing good balance against demand. The lighter cuts seem to be the most readily available, and sellers appear fairly eager to place volumes, with some downward pressure observed in the spot arena.
Future price movements for base oils will likely hinge on developments in the crude oil and refined products divisions-which are very difficult to predict-so buyers and sellers continue to keep an eagle eye on these segments.
And just like any of the athletes who train for a competition, base oil market players can call on their experience and mental preparation to deal with any of the unexpected conditions that may strike them along the way.