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August 14, 2019

Volume 2 Issue 33

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U.S. Base Oil Price Report

Base oil market participants were grateful for the current respite from price fluctuations and supply issues, as activity was proceeding at a reasonably steady pace during the “dog days of summer.”

Most paraffinic and naphthenic base oil segments were adequately supplied, with no shortages mentioned, and there have not been any posted price initiatives communicated this week.

Nevertheless, both producers and consumers kept monitoring crude oil developments closely, since numbers remained volatile and susceptible to geopolitical tensions and changing economic indicators.

Crude oil futures jumped on Tuesday on reports that the United States had decided to delay until December the next round of tariffs that were to be imposed on Chinese goods. The news reassured market participants that there might be a chance for the conflict to be resolved before the new tariffs go into effect.

The U.S. will also be taking some of the items on the tariff list off completely, according to OilPrice.com, citing information posted on the United States Trade Representative website. While the list hasn’t been made public, it will include items that will be removed “based on health, safety, national security, and other factors,” such as cellphones, laptops, toys, computer monitors, and some footwear and clothing items.

Oil futures also received support from reports that major oil-producing countries were considering trimming crude output further, assuaging concerns over global oversupply and rising U.S. production.

The oil market remained on edge as the American Petroleum Institute estimates about U.S. crude oil inventory levels were expected to be released on Tuesday afternoon.

On August 13, West Texas Intermediate September futures settled at $57.10 per barrel on the CME/Nymex and had closed at $53.63/bbl on Aug. 6.

Brent futures for October delivery settled at $61.30/bbl on the CME on Aug. 13, and had closed at $58.94/bbl on Aug. 6.

Light Louisiana Sweet crude wholesale spot prices settled at $59.13/bbl on Aug. 12, compared to $58.73/bbl on Aug. 5, according to the Energy Information Administration.

Low sulfur vacuum gas oil was trading at September WTI plus $15/bbl ($69.93/bbl); high sulfur at crude plus $15.25/bbl ($70.18/bbl) on Aug. 12. By comparison, low sulfur VGO and high sulfur VGO were both hovering at $70.19/bbl on Aug. 5, according to data published by OPIS PetroChemWire.

In other base oil news, there were reports that Motiva was preparing for a turnaround at its Port Arthur, Texas, refinery starting in September, but sources familiar with the unit’s operations said that the turnaround would not affect base oil production. There was no confirmation forthcoming from Motiva, as the company generally prefers not to comment on its plant’s operations.

Market participants involved in import/export activity were also discussing the tensions ensuing from Iran’s suspected attacks on a number of vessels sailing the Strait of Hormuz, which could cause disruptions for oil shipments from the Middle East, although tanker movements seem to continue unabated. Ship owners and operators are reconsidering whether to continue with vessel movements in the region, while insurance companies are either refusing insurance on vessels sailing through the Strait, or have increased fees.

However, base oil market players said that there has not been a significant impact on shipments from the Middle East so far. “We’ve been able to get ships to load cargoes [in the region] and going through the Strait of Hormuz. Some extra war risk premium, but not so terribly much,” a source noted.

Players were also keeping an eye on the situation in Hong Kong – where protests against Chinese authorities have escalated, with protesters gathering at the Hong Kong airport and forcing flight cancellations. Protesters are now demanding an investigation into police brutality and advocating greater democratic and political reforms. The volatile situation could affect trade in Asia and particularly China, sources said.

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

Posted Paraffinic Base Oil Prices

August 14, 2019

(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.