With no unexpected developments taking place on the supply side, base oil market players turned their full attention to upstream conditions, as crude oil and feedstock prices have firmed, reaching three-year highs last week, and continuing to hover at lofty levels this week.
Oil futures bounced around on Tuesday, as political concerns about military conflicts in the Middle East – which helped boost prices last week – have weakened.
Numbers had jumped last Thursday on the back of concerns about potential disruptions of oil supply due to military action in Syria, and retaliatory measures by its allies, Russia and Iran.
The United States, supported by the United Kingdom and France, carried out missile strikes against targets where the supposed chemical weapons might have been produced in Syria. This was one of the expected actions by the U.S., and once it was completed and proved less disruptive than anticipated, oil prices steadied.
On Tuesday, April 3, West Texas Intermediate futures settled at $66.52 per barrel on the CME/Nymex, up $1.01/bbl from $65.51/bbl on April 10.
Light Louisiana Sweet crude wholesale spot prices settled at $69.41 per barrel on April 16, compared to $66.45/bbl on April 9, according to the U.S. Energy Information Administration.
Brent was trading at $71.58/bbl on the CME on April 17, up 54 cents/bbl from $71.04/bbl on April 10.
PetroChemWire reported that low sulfur vacuum gas oil was at May WTI plus $13/bbl ($79.22/bbl) and high sulfur VGO was at crude plus $11.25/bbl ($74.47/bbl) on April 16. By comparison, low sulfur VGO was hovering at $75.92/bbl and high sulfur VGO at crude plus $10.50/bbl ($73.92/bbl) on April 9.
Whenever there are significant price swings on the feedstock side, speculation starts to come forth that these fluctuations might exert pressure on base oil numbers, and eventually could lead to price adjustments, but so far, there have been no revisions.
Sources conjectured that there was not enough support from the demand side to attempt a price move, as domestic requirements have been somewhat sluggish compared to the same time in previous years.
Supply in the API Group II segment was deemed ample, and there were no product shortages in the Group III tier either.
The Group I segment continued to be described as tight. A Group I supplier said it had received spot inquiries for export to Mexico and other destinations, but it had been unable to offer any cargoes as it was in a sold-out position.
While business in the U.S. was deemed fairly steady, but not booming, requirements from Mexico have begun to pick up, supplier sources added.
The restart of the HollyFrontier Group I plant in Tulsa, Oklahoma, this week, was seen as good news by buyers, as availability should start to improve.
The plant was heard to be back on stream after a routine turnaround that lasted slightly longer than originally anticipated. The unit can produce 9,500 barrels per day of Group I base oils.
Additionally, two consecutive base stock increases in the span of a month in the first quarter had already been difficult to absorb, buyers noted, and they welcomed the current price stability. Some finished lubricant producers were just now able to attempt to recoup margins by implementing a second round of price hikes, many of which were due to become effective before the end of the month.
Participants in the naphthenic camp noted a well-balanced market scene, with no price changes reported, despite upward pressure from the crude oil side.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.