Prices were generally maintained within the current price ranges, despite downward pressure from slowing demand. Sources said that there was not much talk about price changes, even with crude oil falling to the lowest levels in several months, because “suppliers and customers seem to be more focused on getting through hurricane season.”

API Group I and Group II availability was snug, despite most producers running plants at top rates given more attractive base oil margins than those for competing fuels. A number of suppliers focused on contract commitments and were unable to offer additional supplies of the Group II 100 neutral grade. “There is no Group II 100N and even some contract customers are not getting the amount of oil they desire,” a market source commented.

Some buyers have been able to cover requirements by securing rerefined 100N, but availability of rerefined material was limited too. Rerefiners have also been running plants at high rates to meet healthy demand.

There was slightly more Group II 220N and 600N grades, with participants noting that there was some length in the 220N segment, but the 600N was largely balanced. Difficulties in acquiring product were partially offset by the fact that consumption levels tend to decline at this time of the year.

An exception to the tight conditions are Group III grades. These cuts had recently experienced snug supply as well, mainly triggered by steady demand and the delayed arrival in the United States of a cargo from the Middle East. However, shipments were back on schedule and there appeared to be a lengthening of some grades, which placed downward pressure on prices. The plentiful supplies were partly due to the fact that Group III prices in the U.S. were more attractive than in other regions, enticing additional shipments. Demand in some key markets such as China has weakened, leaving more Asian and Middle Eastern cargoes available for shipment elsewhere.

Group III 4 cSt seemed to be the cut lengthening the most and prices were therefore exposed to downward pressure, with suppliers starting to adjust indications down. Domestic production of Group III grades was also steady, contributing to the ample availability. Sources were of the opinion that Group III prices had been held artificially high in the U.S. for longer than they should have, and with demand slipping and supply growing, prices were settling at more realistic levels.

In terms of exports of Group I and Group II grades, business has dwindled as spot availability in the U.S. was sparse and buying appetite from India, Brazil, other countries in South America was less robust than during the first part of the year. Nevertheless, there continued to be discussions to move U.S. cargoes to Europe, and Mexican buyers were also eyeing shipments of Group I and Group II grades, although bids fell below suppliers’ expectations in some cases.

Naphthenic base oil supply was generally balanced against demand, with some grades, such as pale 60, seeing healthier consumption levels. Demand for U.S. naphthenic base oils from Europe and to a certain extent, South America, were helping keep domestic inventories in check.

Buyers were monitoring crude oil prices closely, hoping that falling values would trigger downward price revisions for base oils. Given slipping diesel prices, some pale oil accounts that are indexed against diesel would see downward adjustments, but other prices were holding steady, supported by the current tightness and solid demand globally. “The lower crude has not worked its way into the supply chain yet,” a source explained, while others expressed doubt that base oil suppliers would be adjusting prices any time soon, unless crude oil fell to much lower levels and remained at those levels for an extended period.

Crude oil futures plummeted early in the week as equity markets sold off on fears that the U.S. economy might slip into a recession, along with lackluster crude demand from China. West Texas Intermediate crude oil closed at a six-month low below $73 per barrel on Monday. However, on Tuesday, WTI futures inched up as equities showed a rebound from the prior session’s sell-off and there were increased concerns about an Iranian attack against Israel, which could lead to a wider conflict in the Middle East.

On August 6, WTI September 2024 futures settled on the Nymex at $73.20 per barrel, compared to $75.81/bbl on July 30.

Brent futures for October 2024 delivery were trading on the ICE at $76.32/bbl on Aug. 6, compared to $79.11/bbl for September futures on July 30.

Louisiana Light Sweet crude wholesale spot prices were hovering at $76.36/bbl on August 5, from $79.22/bbl on July 29, according to the U.S. Energy Information Administration.

Downstream, finished products manufacturers reported softer buying interest for lubricants, likely due to a seasonal decrease in consumption levels, and ongoing competition among suppliers to gain or maintain market share. Blenders lamented the fact that margins were lean, particularly since most manufacturers had been unable to recoup the base oil price increases implemented back in March and April.

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

Lubes’n’Greases Publications shall not be liable for commercial decisions based on the contents of this report.

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