US Group II base oil margins over feedstocks and competing fuels fell during the week ended 28 October as weak demand and increased surplus availability dropped spot prices.
The Argus US domestic spot Group II N100 premium to four-week average low-sulphur vacuum gas oil (VGO) fell $1.37/USG, down from $1.39/USG the previous week. Margins also dropped below year-earlier levels of $1.45/USG.
The Argus US domestic spot Group II N100 premium to four-week average US Gulf coast diesel slipped to $1.19/USG, down from $1.20/USG a week before. Margins remained above year-earlier levels of 72¢/USG.
Domestic Group II mid- and high-viscosity prices declined on rising supplies and muted demand. Low-viscosity prices were steady as available re-refined grades counterbalance limited virgin Group II N100 supplies.
Some market participants are hesitant to purchase surplus base oils as they try to maintain low inventory levels ahead of year-end taxes. Some of these participants are also seeing downstream customers working to draw down inventories.
Four-week average feedstock VGO prices increased on limited supplies. Some of this upward pressure is being curbed by thin VGO demand because of weaker fluid catalytic cracker (FCC) margins.
The low-sulphur VGO premium to four-week average WTI crude widened to $11.53/bl, up from $10.99/bl a week earlier.
Weak competing fuel margins are still pushing more VGO toward base oil output. This has increased base oil supplies despite thinning seasonal demand.
