The Presidents Day holiday on Monday, coupled with the start of the ICIS World Base Oils & Lubricants Conference in London, resulted in subdued activity, with many players being away during the week.
Some of the topics to be discussed during the ICIS event included the effects of Brexit, innovative technologies and industry disruptors, and new opportunities in the lubricants business, along with many other equally timely subjects.
Participants were also eager to find out how the new API Group II base oils produced at ExxonMobils Rotterdam, The Netherlands, refinery would impact the market in Europe and elsewhere. Product was expected to be commercially available in March, according to sources.
With the new Group II plant starting production in Europe, the refiner was expected to reduce its imports of Group II cuts from the United States and Singapore to feed its downstream lubricants plants there. Many end-users who typically purchase Group I base stocks were also anticipated to switch to Group II cuts in those applications that allow a substitution.
Meanwhile, in the U.S., the base oil market was slowly gathering steam as producers and consumers started to prepare for the busy spring production cycle, although suppliers expressed concern that inventories were not dropping fast enough and a long supply scenario was still exerting pressure on base oil indications.
Buyers, on the other hand, were thankful for the opportunity to evaluate different proposals and did not feel pressure to jump at the first offer because supply of most grades was more than adequate.
A few cuts were said to be tightening due to sudden interest from the export front. There were reports that large parcels of Group II grades had been sold to India, and some cargoes were also on their way to Europe.
Buying appetite for Group I barrels from Mexico continued to be described as steady, as most buyers rely on U.S. base oils due to erratic production at the Mexican producers plant. Additionally, a couple of cargoes were heard sold to Nigeria in the last few weeks, which should also help balance the supply and demand factors in the domestic system.
Steeper crude oil and feedstock prices were lending the base oils market a steadier outlook. Crude oil futures settled at a three-month high as supplies tightened due to production cuts implemented by the OPEC and other oil producing countries. Traders also kept an eye on talks between the U.S. and China hoping that a resolution of the trade dispute would ease concerns about reduced energy demand in both countries, and that this would lift crude prices.
On Feb. 19, West Texas Intermediate (WTI) March futures settled at $56.09 per barrel on the CME/Nymex, up $2.99 cents/bbl from $53.10/bbl on Feb. 12.
Brent futures for April delivery closed at $66.45/bbl on the CME on Feb. 19, and had settled at $62.42/bbl on Feb. 12.
Light Louisiana Sweet crude wholesale spot prices settled at $64.78/bbl on Feb. 18, compared to $59.68/bbl on Feb. 11, according to the Energy Information Administration.
Low sulfur vacuum gas oil was at Mar WTI plus $15.25/bbl ($70.84/bbl) and high sulfur VGO was at crude plus $15.50/bbl ($71.09/bbl) on Feb. 15. (Prices were not be published on Monday, Feb. 18, as U.S. markets were closed for the Presidents Day holiday).
By comparison, low sulfur VGO was hovering at $67.41/bbl and high sulfur VGO also at $67.41/bbl on Feb. 11, 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.