Base oil spot prices in the United States appear to be inching up on tighter supply conditions, but domestic demand is still not as strong as suppliers had anticipated for this time of the year.
Sellers described current requirement levels as “average.” Many consumers appeared to be comparing prices between different suppliers but delaying purchases in hopes of finding the lowest offers.
Comparatively, the spot export market seemed to be more active, with traders and brokers diligently seeking quotes and showing particular appetite for purchasing heavy-viscosity cuts, according to sources.
Some of these base stocks were said to be in limited supply because two API Group II facilities – Chevron’s Pascagoula, Louisiana, unit and the Excel Paralubes plant in Lake Charles, Louisiana – will be undergoing turnarounds in March. Suppliers have therefore restricted spot export sales in order to build inventories and meet domestic contractual requirements during the outages.
The tightening has led to spot export prices climbing by a few cents to as much as 20 cents per gallon for some grades, compared to January levels, sources said. Group II 600 neutral was one of the cuts undergoing steeper adjustments.
Mexican buyers have also shown keen interest in U.S. product following temperate demand in the previous weeks. Sources said that this was likely because base oils have also moved up at other origins, and U.S. prices proved to be more attractive than expected.
On the naphthenic base oils front, activity was said to be steady, with no significant changes over the past few weeks in terms of demand or pricing.
Market players were also keeping a keen eye on crude oil prices, as numbers zigzagged within a narrow range during the week, climbing on Monday and dipping on Tuesday on concerns about a potential build-up in U.S. crude inventories, which could offset the effects of OPEC production cuts.
West Texas Intermediate futures on the CME/Nymex settled at $54.01 per barrel on Feb. 28, down 5 cents from the Feb. 21 settlement of $54.06/bbl.
Light Louisiana Sweet wholesale spot prices closed at $55.52/barrel on Feb. 27, up from $55.21 on Feb. 17, according to data from the U.S. Energy Information Administration. There was no trading on Feb. 20 on account of the Presidents’ Day holiday.
Brent was trading at $55.59/bbl on the CME on Feb. 28, down $1.07 cents from $56.66/bbl on Feb. 21.
There was much talk regarding the U.S. economy ahead of President Trump’s address to Congress on Tuesday evening, in which he was expected to present his economic vision.
A report from the Department of Commerce showed that gross domestic product increased by 1.9 percent in the fourth quarter, unrevised from the previous estimate. Economists had expected the pace of growth to be upwardly revised to 2.1 percent. The unrevised GDP growth in the fourth quarter is significantly lower than the 3.5 percent jump seen in the third quarter.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.