Trading in the United States was somewhat muted because of a lack of readily available spot cargoes and the absence of participants during the Independence Day holiday week.
As has been the case over the last couple of months, API Group I and II producers reported sold-out positions, with very few – if any – spot cargoes to offer.
Despite a softening of crude oil and feedstock values, both posted and spot prices were stable in the U.S. because of the current supply crunch.
Participants said that the snug conditions were overshadowing crude oil volatility and expected the tightness to hold at least another 45-60 days.
Another source agreed that availability was likely to remain limited for the next few weeks, and would improve only later in the year – unless there were some unplanned interruptions at refineries, political or weather related problems.
The heavy-viscosity oils in both the Group I and II categories were heard to be particularly snug, with bright stock mentioned as one of the most sought-after grades.
Sources reported that bright stock spot availability at the border with Mexico was almost non-existent. Spot indications in the vicinity of $3.20/gal were mentioned, but most participants agreed that prices were largely notional at the moment as little business was being concluded.
There was continuing interest noted from Mexican buyers, and given that U.S. product was very difficult to locate, some cargoes have been brought into the U.S. from Brazil and Asia and exported to fill the supply gaps in Mexico, but the cargoes were not particularly big, sources said.
Mexico is very active in trying to secure supply, but we do not have anything to offer currently, a domestic supplier emphasized.
Another source explained that since the Group I heavy-viscosity grades were difficult to obtain, some consumers were opting for spot Group II cuts instead, which at least one U.S. supplier was heard to be offering into Mexico for July shipment.
Plant turnarounds during the first half of the year and fairly steady demand were behind the strained supply fundamentals in the domestic market.
Motiva and Chevron have recently brought back their Group II base oil facilities on stream, and the naphthenic plant at Refineria Isla in Emmastad, Netherlands Antilles – whose production is marketed by Nynas – was also heard to be running well, despite a fire at the refinery in late May.
Looking ahead, Petro-Canada was heard to be planning a turnaround at its Group II/III plant in Mississauga, Ontario, Canada, in the fourth quarter.
Petro-Canadas products are being marketed by HollyFrontier, which purchased Petro-Canada Lubricants operations last February. The Mississauga plant can produce 11,600 barrels per day of Group II and 4,000 b/d of Group III oils, according to LubesnGreases 2017 Guide to Global Base Oil Refining.
While Group III production at the Mississauga location is comparatively small, it is one of only two sources of virgin Group III output in North America, the second being Calumets plant in Shreveport, La., which manufactures 400 b/d. The majority of domestic Group III requirements are met by imported product from South Korea.
The upcoming outage in Mississauga may partly contribute to a further tightening of Group III availability, which has been brought about by an extended unplanned outage at the Shell-Qatar Petroleum Pearl gas-to-liquids refinery in Ras Laffan, Qatar.
The GTL unit was heard to be in the restart process, and product was expected to be available in July, but this could not be confirmed. Shell has had to secure base oils from other suppliers to feed its own downstream lubricant operations, leading to a tightening of Group II and III supplies, sources noted.
Upstream, crude oil futures slipped on news that Libyas oil production has climbed to more than 1 million barrels a day for the first time in four years, just as oil prices had recovered following a dip in U.S. shale oil production.
West Texas Intermediate futures on the CME/Nymex traded at $47.07 per barrel on July 3 (there was no trading on July 4 due to the holiday), up $2.83/bbl from $44.24 per barrel on June 27.
Light Louisiana Sweet wholesale spot prices closed at $48.12 per barrel on June 30, and had settled at $45.14/bbl on June 26, according to data from the U.S. Energy Information Administration.
Brent was trading at $47.87/bbl on the CME on July 3, up $1.22/bbl from $46.65/bbl on June 27.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.