Producers main concern remains the hefty inventory levels at most base oil facilities, particularly as demand has been slow to pick up the pace, but the approach of the spring buying season seemed to be a light at the end of the tunnel.
A number of suppliers noted that orders had improved slightly over the last week, and were hopeful that this would be indicative of a growing trend in coming months.
Despite the small improvement in demand, most grades were heard to be well supplied, and this continued to weigh on price ideas, particularly for spot transactions. The heavy-viscosity grades were said to be readily available and discounts for these cuts were more significant.
Participants continued to monitor the progress of ExxonMobils API Group II plant in Rotterdam, as this would likely lead to fewer intra-company shipments moving to Europe and more product from the refiner becoming available in the U.S. The Rotterdam project was on schedule and the plant was expected to come on stream and produce on-spec product in March, according to sources familiar with the companys operations.
At the same time, a turnaround at the largest of ExxonMobils crude distillation units in Baytown, Texas, were heard to be impacting base oil production. Nevertheless, the refiner appeared to be in possession of adequate supplies to meet its contractual obligations and offer a few barrels for spot business.
On the naphthenic side, San Joaquin Refining was preparing to shut down its refinery for a two to three-week turnaround and has been building inventories, which meant that less product was available from the producer, resulting in a slight tightening of supplies. San Joaquins base oil plant in Bakersfield, California, can produce 8,100 barrels per day of naphthenic base oils, and is scheduled to be taken off-line on Feb. 2.
Upstream, crude oil futures bounced back on Tuesday after Mondays steep decline, following the United States implementation of sanctions on Venezuelan state-owned oil firm PDVSA.
However, global oil supply remains high in spite of OPECs and other oil-producing countries output cuts, largely due to an increase of more than 2 million barrels per day in U.S. crude oil production last year to a record 11.9 million bbl/day.
At the same time, Mexico is not considering importing any more crude oil after Pemex imported four shipments of 350,000 barrels of light crude oil from the U.S. for delivery in November, Energy Secretary Rocio Nahle told lawmakers on Monday, according to Reuters. Mexico also imported about 300,000 barrels of crude in December, and President Andres Manuel Lopez Obrador – who took office last December – has repeatedly said he wants to reduce fuel imports.
On Jan. 29, WTI February futures settled at $53.31 per barrel on the CME/Nymex, up 74 cents/bbl from $52.57/bbl on Jan. 22.
Brent futures for March delivery closed at $61.32/bbl on the CME on Jan. 29, and had settled at $61.50/bbl on Jan. 22.
Light Louisiana Sweet crude wholesale spot prices settled at $58.24/bbl on Jan. 28, compared to $59.18/bbl on Jan. 18, according to the EIA. (There was no trading on Jan. 21 due to the Martin Luther King Jr. Day federal holiday).
Low sulfur vacuum gas oil was at Mar WTI plus $10.25/bbl ($64.44/bbl) and high sulfur was at crude plus $10.00/bbl ($61.99/bbl) on Jan. 28. By comparison, low sulfur VGO was hovering at $65.57/bbl, and high sulfur VGO was also at $65.57/bbl on Jan. 23, according to data published by PetroChemWire.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase inExcel format.