29 October 2008 17:24 [Source: ICIS news]
By Heather McGuire Doyle
HOUSTON (ICIS news)--US naphthenic base oil spot price ideas were falling rapidly as feedstock values and demand plummeted, market players said on Wednesday.
“Many buyers are sensing that the spread between crude and base oils is too large, and they are holding off buying so that they do not get stuck with high dollar inventory,” a supplier said.
It is a big change from the tight market seen just three weeks ago.
As prices fell at record speed, US and Latin American buyers took a low profile.
Some US-based naphthenic sellers were beginning to battle over market share, resulting in a few offer prices at some of the lowest levels heard among players.
But of even greater interest was talk in the spot market.
Spot offers for grades 200 and 700 had moved down at least 80 US cents/gal ($240/tonne, €190/tonne) from September levels, compared with a 50 cent/gal drop in contract prices, a seller said.
“Offers of just under $4/gal FOB (free on board) US are now being turned down by buyers, and buyers say this is still 50 cents too high,” a trader said.
A buyer said offers of $3.5/gal FOB
Spot prices for Pale 2000 were tracked around $2.58/gal FOB in September 2007.
That price surged to $4.25/gal in one year, a 65% increase, according to global chemical market intelligence service ICIS pricing.
“Buyers have been waiting a long time to do some testing of the waters and they are going to put the pressure on the suppliers as much as possible at this point,” a supplier said.
Crude prices have fallen 57% since the high of $147.27/bbl in July. Still, naphthenic sellers said crude has not been down long enough for pale oil prices to fall so fast.
“The naphthenic base oil market is moving faster than ever before,” a seller said. “No one expected this.”
But even with the dramatic drop in naphthenic offer prices, little activity was confirmed at the current offer levels and a few market players said the bid challenges were still wishful thinking - at least for now.
Export activity has come to a halt in most cases as players watched currency values plunge, which in turn has added length to the domestic market.
Moreover, domestic demand is falling as the
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