The summer vacation period that typically slows down activity has started to have an effect on the U.S. market, except that supply this time seemed tighter than in years past.
A combination of a busy plant turnaround schedule during the first half of the year – not only in the U.S., but in other regions as well – and healthy demand on the domestic and export fronts resulted in strained availability for paraffinic and naphthenic base oils alike.
Most producers reported that inventories were very lean, limiting spot volumes, and that requirements were still fairly robust, making it difficult to keep up with orders.
Sources were under the impression that the lighter viscosity oils were the tightest, and that the heavier-vis cuts, such as the Group II 600N, were slightly more available.
One supplier noted that its tanks were virtually empty despite operating the plant at full capacity. The supplier also said it was running behind orders, and was already receiving October requests.
Another participant commented, There are backlogs of orders for almost everything, but we see definite (in our opinion) signs of loosening by the end of August.
With the return of most facilities to production, following planned and unplanned outages, and the traditional summer slowdown, supply was expected to lengthen in the next couple of months, although it was difficult to pinpoint exactly when this would be the case.
The snug supply was keeping prices stable, although spot indications were still exposed to upward pressure on account of the limited number of cargoes on offer.
Bright stock spot prices, in particular, were seen edging up consistently over the last few weeks at the U.S.-Mexico border.
Crude oil prices were trading within a narrow range and edged up this week, offering additional support to steady base oil pricing.
Oil futures inched up on Tuesday following a report that Saudi Arabia was considering cuts in crude exports, partly offsetting the latest data showing that U.S. production was on the rise this year. A sharply weaker U.S. dollar and signs of stronger global oil demand also boosted numbers.
West Texas Intermediate futures on the CME/Nymex traded at $46.40 per barrel on July 18, up 91 cents/bbl from $45.49 per barrel on July 12.
Light Louisiana Sweet wholesale spot prices closed at $48.37 per barrel on July 17, according to data from the U.S. Energy Information Administration.
Brent was trading at $48.84/bbl on the CME on July 18, up $1.10/bbl from $47.74/bbl on July 12.
Low sulfur vacuum gas oil was trading at August WTI plus $8.65/bbl ($54.67/bbl), and high sulfur VGO was at crude plus $7.40/bbl ($53.42/bbl) on July 17, according to PetroChemWires Daily Refinery Focus.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.