01 September 2010 18:14 [Source: ICIS news]
HOUSTON (ICIS)--Spot values for most paraffinic base oils, except for brightstock, have begun to fall in line with posted prices amid improved supply, sources confirmed on Wednesday.
Base oil inventories for light grades of Group I and II base oils were finally easing slightly as allocations were removed, but heavy grades remained difficult to source, buyers and sellers said.
Solvent neutral (SN) 150 was offered on the spot market for September at $3.16/gal ($967/tonne, €764/tonne), the same price as ExxonMobil’s posted value for SN150.
Spot prices had been higher than posted values for more than 10 weeks in the US. In a balanced-to-long market, spot prices can be around 10-15% lower than posted prices.
The spot discounting followed a Group I base oil price drop of up to 6% during early August. Spot values often drop the same time as posted prices, but held firm the last four weeks amid tight supply.
Ongoing tightness for brightstock kept spot prices above posted levels into September. Players were not able to offer brightstock into spot market. In rare cases, a customer mentioned receiving a brightstock truck for about 20 cents/gal over posted prices.
Both Holly and American Refining (ARG) remained on sales controls for brightstock. Holly has been on 50% sales control since June, while ARG issued a sales control following a production problem in mid-July.
ARG said it expected its sales limits to last for the next two-to-three months. Market players expected brightstock supply in the US would improve by November.
Although demand had quieted with the seasonal lull the market traditionally sees in July and August, buyers and sellers said the market had remained steady.
In several cases, buyers and sellers were using the seasonal demand drop to catch up on delayed orders, rebuild low inventories and prepare for hurricane contingency plans.
Base oil demand typically strengthens in late September and early October as blenders and compounders begin manufacturing for the fall peak oil change season.
($1 = €0.79)
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