The U.S. base oil arena was fairly quiet following the annual Spring Independent Lubricant Manufacturers Association meeting held last week, but suppliers reiterated that demand continues to build and overall inventories appear to be well balanced.
A lack of spot material helped to keep market activity tempered. A number of producers who previously had surplus product have managed to off-load these spot volumes either to contract customers needing additional quantities, or by exporting to deep-sea destinations.
Otherwise, base oils fundamentals held firm this week. Posted prices are holding steady as well, following a recent full round of increases. Since mid-March, demand appears to continue to build weekly, players noted.
Ahead of the price hikes that began in February and wrapped up in mid-April, producers had been coping with deflating operating margins because of rising feedstock costs. As demand picked up, albeit slowly according to some suppliers, and inventories began to shrink, producers gained confidence to increase paraffinic base stock prices.
Although there has been little heard regarding an official price move on naphthenic prices, it is understood that a number of producers have either removed temporary voluntary allowances (TVAs), or have nudged up prices on a case by case basis with perspective customers. Sources also suggested that most pale oils are tight in supply and have grown even more so in the past several weeks.
Meanwhile, the U.S. Coast Guard said that they closed a section of the Illinois River near Peoria to all traffic on Monday in efforts to protect levees following heavy flooding that forced closures at a number of locks. Crews worked to recover dozens of barges that had broken free due to the treacherous currents.
As well, a 15-mile stretch of the Mississippi River near St. Louis was closed this past weekend after over 100 barges broke free and more than 10 of the barges sank. A salvage company is currently in the process of raising the sunken barges and recovering the others that had broken loose.
The Coast Guard also reported that another barge accident that happened on Sunday morning further south near Vicksburg, Miss., halted river activity between mile markers 415 and 436 before one-way traffic was allowed to resume early on Monday.
A company spokesperson confirmed that the Chevron Refinery in Richmond, Calif., was now in start-up mode, following a fire that brought the plant down last August. The official update went on to say that the company was in the process of testing and commissioning the crude unit and are taking the time necessary to perform this work safely and effectively. Once this process is complete, we will restart the crude unit in the near term.
In the meantime, other sources and direct buyers of the California-based refiner indicated that Chevron was also in the process of ramping up base oils production and hoped to achieve top rates by early May. According to 2012 statistics released earlier this year by the U.S. Energy Information Administration, Richmond had been averaging about 520,000 barrels of base oil a month; after the fire in August, it averaged barely one-fifth of that volume during the remainder of last year.
At the close of the Tuesday, April 23, CME/Nymex session, front month light sweet crude oil futures ended the day at $89.18 per barrel, a very modest gain of 46 cents/bbl from last weeks settlement at $88.72.
Brent Crude was trading at $100.23/bbl at the end of the day yesterday, slipping by a mere 16 cents/bbl from its week-ago level of $100.39.
LLS (Light Louisiana Sweet) crude was trading at a premium of $12.80/bbl to WTI on Tuesday.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.