Bullish Sentiments Clouded The US Base Oil Market

New York: According to the data released by the US Government Energy Information Agency last week, the overall US Base Oil production in March has observed an increment of 15% on a year-on-year basis. The overall production totaled around 5.16 (approx) million barrels compared to the 4.4 million barrels last year, and the volume was 11% higher compared to February. It has also been reported that the cumulative production in the first quarter of 2022 observed an increment of 10% compared to the last year.

Several analyses claim that such developments were majorly caused due to the improved demand from the consumer market, as the post-pandemic recovery of the market and public movement has restored the sentiments of the players in the US. Furthermore, since the conflict broke out in the eastern European region in late February this year, the implementation of a series of retaliatory measures against Russian energy materials by the US and the European Union with the cooperation of several other countries has tightened the global supplies. As a ripple effect, it resulted in a sudden surge in demand for Base Oil, and the European players were hesitant to procure the Russian feedstock cargoes in the Black Sea region. Besides, the market players were keener to source from other supplies and presented a crucial opportunity for the US players to gain better netbacks.

Aside from dealing with the unprecedented shift with constant volatilities in crude oil prices, Base Oil producers were cladding with the uncertanities related to feedstock supplies. At the same time, the suppliers were operating the plats at the optimum rates to control the rising supply-demand gap. In addition, the dynamic shift in the arbitrage pattern has primarily been observed to levy its impact on the major exporting nations of the Base Oil. According to the data released by the Korean customs services, South Korea's export volumes of the Base Oil in May observed an increment of 20% on a year-on-year basis.

As per ChemAnalyst pricing intelligence, the FOB prices for the Base Oil Group II N600 observed an increment of 15.83% since the start of the second quarter. The series of developments in the market has levied its impact on the producer's quotations of the Base Oil across the regions. Whereas in the US, producers were revising their quoted offers against the healthy demand from the downstream market. In the final month of the second quarter, the quotations were revised twice within ten days, and the bullish sentiments clouded the domestic market.