Customers were heard to be building inventories in preparation for potential supply disruptions during the hurricane season – which runs from June 1 until Nov. 30 – but hoped that there would not be a repeat of last year’s devastating weather conditions.
The 2018 Atlantic hurricane season should be quieter than normal, according to a revised prediction released by meteorologists at Colorado State University on July 2, who had previously forecast an active season.
Other than these preparations, few changes appeared to upset the sedate rhythm that the base oils market has settled into, with supply of most grades deemed ample to meet current requirements.
Base stock prices were stable and there was little talk about future initiatives; perhaps this was because crude oil and feedstock values have been very volatile and difficult to predict, and producers preferred not to risk the loss of business due to attempts to implement price hikes.
While order volumes were not as strong as a couple of months ago, most suppliers said that they were managing to keep inventories balanced against demand, but this could change later in the year, when stocks tend to build as requirements languish.
Should there be no supply disruptions caused by extreme weather, then product could lengthen and exert pressure on pricing, sources noted.
Currently, API Group II supply appears to be plentiful, with spot offers available for most grades, while the Group I segment remains balanced-to-tight. Conditions within the Group III tier were described as steady.
A few Group I and Group II producers have been able to ship product to Brazil, Mexico, Colombia, Nigeria, India and China over the last few weeks, with buying interest said to be steady for some grades, and soft for others.
In the case of Mexico, sources also said business had slowed down slightly because of a weak peso against the dollar.
On the naphthenic front, there had been some discussion about price increases needed to offset the steep crude oil prices when numbers had reached three-year highs, but talk about price adjustments has subsided.
Upstream, crude oil futures have see-sawed over the last couple of weeks, moving up one day and tumbling the next. On Monday, numbers were up after Sunday’s harsh word exchange between Iranian president Hassan Rouhani and United States President Donald Trump. However, the U.S. administration was likely to avoid any confrontation that could drive oil prices up as midterm elections are approaching, analysts noted.
A 24-hour strike at Totals oil and gas platforms in the United Kingdom North Sea ended as planned on Tuesday, but the platforms will need up to 24 hours to resume full production, Reuters reported. Oil and gas rigs workers began the strike after the UKs biggest trade union, Unite, and Total failed to agree on pay and work shifts.
On Tuesday, July 24, West Texas Intermediate futures settled at $68.52 per barrel on the CME/Nymex, up 44 cents/bbl from $68.08/bbl on July 17.
Light Louisiana Sweet crude wholesale spot prices settled at $67.78 per barrel on July 23, compared to $69.97/bbl on July 16, according to the U.S. Energy Information Administration.
Brent was trading at $73.44/bbl on the CME on July 24, up $1.28/bbl from $72.16/bbl on July 17.
Low sulfur vacuum gas oil traded at Sep WTI crude plus $11.25/bbl ($79.14/bbl) and high sulfur VGO at crude plus $9.75/bbl ($77.64/bbl) on July 23. By comparison, low sulfur VGO was hovering at $78.06/bbl and high sulfur VGO at $77.06/bbl on July 16, 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.