US base oil exports sidelined on supply, price-drop expectations

23 August 2011 20:45  [Source: ICIS news]

HOUSTON (ICIS)--US base oil exports are sidelined as supplies in the domestic market continue to recover and as buyers expect that prices will drop in September, buyers and shipping sources said on Tuesday.

Hefty price increases in May and June are under close watch from the buying side because of recent volatility in the petroleum crude oil costs.

US benchmark crude West Texas Intermediate (WTI) has tracked below $90/bbl for several weeks. The wider Brent crude basket of oils has also dropped, causing buyers across the global market to expect base oil prices to fall in September.

These expectations have buyers concerned that late August and early September purchases for forward month positions could lose value.   

US spot prices edged down marginally in SN150 and brightstock, but there is yet no evidence that sellers are interested in offering discounts for exports because the supply issue remains pertinent.

US SN150 spot prices were assessed at $4.46-4.65/gal, down 4-5 cents/gal from the previous assessment on slight improvements in inventories. Brightstock spot was most recently assessed at $5.54-5.65/gal, down 5 cents/gal on the high end and no change on the low.

Unusually tight supply conditions caused by planned and unplanned production outages dominated the first half of 2011. Adding punch to the short supply issues, US base oil demand rebounded, especially in automotives, surprising many market players.

Despite a recent restart at a base oils complex, inventories remain narrow enough to discourage the 3,000-8,000 tonne volumes typically required for deep-sea export shipments, buyers and sellers said.

US deep-sea exports have been thwarted by the supply condition, but traders and shipping sources expected that supply would sufficiently improve in September to offer cargo opportunities.

By: Judith Taylor
+1 713 525 2653

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