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July 10, 2019

Volume 3 Issue 8

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U.S. Base Oil Price Report

A number of base oil producers have taken a wait-and-see position, following Chevron’s posted price increase last week.

Chevron raised its API Group II base oil prices by 20 cents per gallon across the board, effective July 2. Participants agreed that the increase was likely spurred by steeper crude oil and feedstock costs and a snug supply/demand scenario.

While a few participants viewed Chevron’s initiative as the kick needed to start the ball rolling to achieve widespread price adjustments, others preferred to tread carefully given the current crude oil price volatility and the fact that product requirements tend to soften in the summer.

Demand was described as healthy, although activity was subdued last week due to the Fourth of July holiday. “The domestic market is surprisingly steady,” a supplier noted, with orders picking up again this week as some buyers hoped to get ahead of potential price revisions.

“Overall the market prices appear to have held up well since the last price increase in May,” a producer commented, while another source said that discounted spot quotes were hard to find because suppliers were not really trying to move large volumes as the market was balanced-to-tight.

Another market participant commented that Europe and Asia were oversupplied, and United States sellers needed to be cautious about their pricing strategy as suppliers elsewhere appeared willing to offer competitive numbers in order to move product to other regions.

The naphthenic side of the business was described as stable, with supply deemed adequate to cover requirements and no price movements heard, despite pressure from squeezed margins.

Crude oil futures moved up early on Tuesday as investors focused their attention on Middle East tensions, OPEC’s production cuts, and reports that Russia’s oil production in early July was down to its lowest in nearly three years.

Additionally, energy reports were expected to come out later in the week and reveal a draw in U.S. crude inventories, offering further support to prices.

On July 9, West Texas Intermediate August futures settled at $57.83 per barrel on the CME/Nymex and had closed at $56.25/bbl for July futures on July 2.

Brent futures for September delivery settled at $64.16/bbl on the CME on July 9, and had closed at $62.40/bbl on July 2.

Light Louisiana Sweet crude wholesale spot prices settled at $62.05/bbl on July 8, compared to $63.38/bbl on July 1, according to the Energy Information Administration.

Low sulfur vacuum gas oil was at August WTI plus $12.25/bbl ($69.91/bbl); high sulfur was at crude plus $12.25/bbl ($69.91/bbl) on July 8. By comparison, low sulfur vacuum gas oil was hovering at $74.84/bbl and high sulfur VGO at $73.34/bbl on July 1, 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 in Excel format