U.S. Base Oil Price Report

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There were few fireworks to mark the start of the new year in the U.S. base oils market, as many participants were away during the year-end holidays and prices showed steady behavior.

The year 2019 ended on a more positive note than expected, as inventories were less burdened with product overhang, and spot prices stabilized after selected discounts and temporary competitive allowances had been imparted on a number of accounts during November and early December.

At the same time, consumers were confident that they would be able to find as much product as needed once they returned to the trading scene, as no shortages were noted.

Export movements slowed down ahead of the holidays, but buying interest was expected to pick up in early January, particularly as there were reports of product tightening in Europe. Appetite from European buyers had declined ahead of the holidays, but an expected increase in demand for high performance base oils – API Group II products in particular – from the automotive sector was expected to fuel some of these requirements.

Mexican requirements were also anticipated to pick up after the holidays, as one train at the local producers plant in Salamanca was running irregularly, while the other train remained shut down, according to sources.

A domestic Gulf Coast Group II producer was said to be experiencing some product lengthening due to a more restricted company export strategy, and was therefore likely to resort to adjusting operating rates, sources commented.

One of the elements that market players were watching closely was the price of crude oil and raw materials. Supply is probably not a problem, but feedstock prices are headed up, a source noted.

Crude oil futures rallied during early trading on Monday and jumped over the $62 per barrel mark on optimism regarding the ongoing trade talks between the United States and China, but retreated later in the session on expectations of reduced global demand in the new year.

On Monday, Dec. 30, West Texas Intermediate futures settled at $61.68 per barrel on the CME/Nymex, and had closed at $60.52/bbl on Dec. 23 and $60.94/bbl on Dec. 17.

Brent futures for February delivery were reported at $68.44/bbl on the CME on Dec. 30, up from $66.39/bbl on Dec. 23 and $66.10/bbl on Dec. 17.

Light Louisiana Sweet crude wholesale spot prices settled at $65.08/bbl on Dec. 27 and had closed at $64.21 on Dec. 16, according to the Energy Information Administration.

(Please note: The VGO prices that appear on this report will be temporarily suspended until arrangements with a new provider of the daily quotes are finalized).

Historic and current base oil pricing data are available for purchase inExcel format.

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