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December 6, 2017

Volume 17 Issue 49

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U.S. Base Oil Price Report

At the ICIS Pan American Base Oils and Lubricants Conference in New Jersey, Bapco's Norman Sheppard discussed the changing production and consumer trends that will influence the base oil and lubricants industry in coming years.

Sheppard underscored that the challenges and trends are coming at an accelerated pace and analyzed such consumer behavior as a reluctance by the younger generations to get a driver's license and own a car.

While there has been speculation about how much of Bapco's material would be moving to the U.S. and who would be representing the producer, rumors circulated that a large trading company and a major lubricant supplier would be awarded the portion of production that Bapco is entitled to from its plant in Sitra, Bahrain. The Neste/Bapco joint venture plant can produce 8,200 b/d of Group III oils.

Another piece of exciting news was delivered at the conference by Bryan Schorzman, general manager for Motiva Base Oils, who revealed that the company would be producing Group III base oils at its Port Arthur, Texas, refinery (for further details, please see Motiva Rolls Out Group III in this issue of Lube Report).

Many discussions centered on Group III production and the new trade flow patterns likely to emerge in coming years, given the added capacity in the U.S. and the Middle East.

While Motiva was heard to have already found a home for most of the commercial volumes it intends to produce in the first year, market participants surmised that the new U.S. output would displace some of the Group III volumes that have been traditionally imported from South Korea and, more recently, from the United Arab Emirates.

On the domestic naphthenic market, participants reiterated that the segment was ending the year with generally balanced inventories, as requirements have remained steady over the last few weeks, supporting stable pricing.

Valero was heard to have resumed production at its naphthenic base oil plant in Three Rivers, Texas, following a routine turnaround, market sources said. The plant, which can produce 2,400 b/d naphthenic oils, remained off-line for the month of November.

Upstream, crude oil prices eased at the start of the week from their steep post-OPEC meeting levels, but they still remain very close to the 2017 peaks reached in November.

The OPEC, together with 10 non-member oil states including Russia, reached an agreement to extend production quotas for another nine months last week.

Fundamentals supported current price levels, with demand growth outpacing supply globally, according to industry data. However, an increase in U.S. shale production, which may be motivated by the higher crude prices, constitutes one of the key factors to watch for as the market moves into the new year.

WTI futures closed at $57.62 per barrel on the CME/Nymex on Tuesday, Dec. 5, down 37 cents per barrel from $57.99/bbl on Nov. 28.

Light Louisiana Sweet wholesale spot prices settled at $63.13 per barrel on Dec. 4, down from $64.23/bbl on Nov. 27, according to data from the U.S. Energy Information Administration.

Brent was trading at $62.86/bbl on the CME on Dec. 5, down 75 cents/bbl from $63.61/bbl on Nov. 28.

Low sulfur vacuum gas oil was at Jan WTI plus $11.75/bbl ($69.22/bbl) and high sulfur VGO was at crude plus $9.50/bbl ($66.97/bbl). In comparison, low sulfur VGO was hovering at $69.61/bbl and high sulfur VGO at $67.86/bbl on Nov. 27, according to data published by PetroChemWire.

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

Posted Paraffinic Base Oil Prices

December 6 , 2017

(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 chart

*ExxonMobil prices obtained indirectly.