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November 7, 2018

Volume 1 Issue 46

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U.S. Base Oil Price Report

The mid-term elections in the United States captured some of the market’s attention on Tuesday, Nov. 6, resulting in fairly muted activity at the start of the week.

Market participants acknowledged that base oil requirements had softened as expected for this time of the year, and this, together with ample supply, was placing pressure on spot prices.

While some API Group I spot prices had shown a small uptick in October on the back of posted price increases, they now appeared to be exposed to downward pressure due to plentiful availability of competing Group II cuts.

Bright stock spot prices were heard to be holding their ground slightly better as supply of this cut was tighter than for other grades, but spot business was taking place well below posted prices, sometimes around $1.50/gallon lower, depending on the supplier, according to sources.

Mexican demand for U.S.-origin bright stock and other Group I cuts was described as satisfactory, but margins were suffering as buying ideas were relatively low, sources noted.

Some small cargoes were also heard to have made their way to South America in October, but it was not clear whether any deals had been concluded for November lifting.

A Group I producer was expected to offer a cargo of several grades for export in November. There was talk that the supplier had attempted to move a similar cargo in October, but bids had been considered too low.

While the Group II grades were more vulnerable to the downward pressure due to plentiful availability, the other grades were not immune either, and spot discussions were heard to be taking place at reduced levels this week.

It was not clear what the reason for the extra availability of Group II oils was-- together with the ensuing softer values--but sources said that it was not simply a matter of a build-up in year-end inventories and tax concerns, which typically prompt suppliers to lower offers.

Some participants pointed at a global surplus situation as one of the factors behind the high inventories and weaker values in the U.S., given that there seemed to be fewer export opportunities.

On the naphthenic front, prices were reported as steady, following the increases implemented in late September/early October, while supply/demand conditions were described as relatively balanced. This was partly attributed to the fact that a couple of producers had streamed feedstocks away from base oil output to produce diesel.

In production, there were reports that Petro-Canada was conducting a 40-day turnaround at its base oils plant in Mississauga, Canada, and that some accounts were placed on allocation, but no confirmation could be obtained from the producer directly. The plant has capacity to produce 11,600 barrels per day of Group II base oils and 4,000 b/d of Group III oils.

Upstream, crude prices declined further on Tuesday, following the announcement that President Trump had granted waivers to eight countries that would allow them to continue importing Iranian oil, even after the U.S.’ re-instatement of sanctions targeting Iran’s oil, banking and transport sectors.

China, India, South Korea, Japan, Italy, Greece, Taiwan and Turkey were granted waivers, and these countries take as much as three-quarters of Iran’s seaborne oil exports, meaning Iran will still be allowed to export some oil for now, Reuters reported.

There was also concern that the trade dispute between the U.S. and China would dampen growth in the world’s two biggest economies, while currency weakness was pressuring economies in Asia, including India and Indonesia.

On Tuesday, Nov. 6, West Texas Intermediate December futures settled at $62.21 per barrel on the CME/Nymex, down $3.97/bbl from $66.18/bbl on Oct. 30.

Brent futures closed at $72.13/bbl on the CME Tuesday afternoon, and had settled at $75.91/bbl on Oct. 30.

Light Louisiana Sweet crude wholesale spot prices settled at $71.42/bbl on Nov. 5, compared to $74.75/bbl on Oct. 29, according to the U.S. Energy Information Administration.

Low sulfur vacuum gas oil was at Dec. WTI plus $15.50/bbl ($78.60/bbl) and high sulfur was at crude plus $15/bbl ($78.10/bbl) on Nov. 5. By comparison, low sulfur VGO was hovering at $81.04/bbl and high sulfur VGO at $80.54/bbl on Oct. 29, according to data published by PetroChemWire.

Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.

Posted Paraffinic Base Oil Prices

November 7, 2018

(Prices are FOB basis, in U.S. dollars per gallon and U.S. dollars per metric ton).

Lubes'n'Greases Publications shall not be liable for commercial decisions based on the contents of this report. 

U.S. Base Oil Price Report table

*ExxonMobil prices obtained indirectly.

**Posted prices are higher on the U.S. West Coast and in the Northeast.