The base oils market seems to have switched to summer mode, with activity described as healthy, but slightly less vibrant than a couple of weeks ago, and prices staying largely flat.
The API Group I segment remained tight due to a precautionary shutdown at HollyFrontiers Group I plant in Tulsa, Oklahoma, a couple of weeks ago, caused by heavy rains and severe storms that threatened to damage the river levees in the area. The unit was heard to have been restarted last week, and the producer was doing its utmost to meet contractual obligations, sources noted.
Aside from the production outage, the flooding disrupted railroad transportation and halted barge traffic on the Mississippi River system. Some parts of the Mississippi reopened on Monday, but others were still closed, according to local media reports.
While Group I base oils remained snug, with bright stock reported as extremely scarce, other segments of the market, such as the Group II category, have tightened as well. At least three of the Group II domestic producers were heard to have little extra availability, with the 600N cut said to be particularly limited in terms of supply.
A few Group I buyers were resorting to purchasing Group II base stocks for those applications in which product substitution was possible. We are doing ok obtaining our oils since it is easier to change formulas in the industrial markets, as the auto market has many more restrictions on blending base oils, a market player explained
Participants continued to monitor crude oil values closely, since these remained volatile and might impact base oil price indications if they continued on a downward trend.
On Tuesday, crude oil futures declined on weak global economic indicators and concerns over reduced crude demand. The concerns were further fueled by an unexpectedly weaker industrial output growth report in China.
Crude losses were likely capped, however, by worries about a supply disruption due to increased tensions in the Middle East following last weeks attacks on two tankers in the Gulf of Oman, Yahoo Finance reported.
On June 18, West Texas Intermediate July futures settled at $53.90 per barrel on the CME/Nymex and had closed at $53.27/bbl on June 11.
Brent futures for July delivery settled at $62.14/bbl on the CME on June 18, and had closed at $62.29/bbl on June 11.
Light Louisiana Sweet crude wholesale spot prices settled at $59.82/bbl on June 17, compared to $60.83/bbl on June 10, according to the Energy Information Administration.
Low sulfur vacuum gas oil was off 50 cents at July WTI plus $16.25/bbl ($68.18/bbl); high sulfur VGO was off $1.75 at crude plus $16/bbl ($67.93/bbl) on June 17. By comparison, low sulfur VGO was hovering at $71.01/bbl and high sulfur VGO at $71.01/bbl on June 10, according to data published by OPIS PetroChemWire.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase inExcel format.