Despite ongoing plant maintenance programs and fairly steady demand, base oil availability in the United States has attained more comfortable levels than a couple of months ago, although the situation was not the same across the board as certain segments remained strained and others were showing a seasonal lengthening of supplies.
A majority of producers reported having been able to build inventories as plants were running well, following several months of playing catch-up with orders given that stocks had been depleted and production disrupted by severe weather. Logistical issues and labor shortages had hampered the timely shipment of material as well.
As is common at the end of each year, suppliers may resort to lowering the price of certain grades in order to promote orders and finish the year with lower inventories. Others may also consider dialing back operating rates.
A number of current maintenance shutdowns did not appear to have a significant effect on availability as most producers had padded inventories to meet contractual obligations during the outages.
On the naphthenic base oil front, Calumet has just started a turnaround at its Princeton, Louisiana, plant which was expected to last one to two weeks. The company said that the turnaround was on schedule and requirements would be covered during the shutdown. The Princeton plant can produce 6,900 barrels per day of naphthenic base oils, according to Lubes’n’Greases Base Stock Plant Data.
Ergon began a planned maintenance event at its naphthenic plant in Vicksburg, Mississippi, on Oct. 23, which was expected to last between seven and 16 days. The plant’s capacity is 22,000 barrels per day of naphthenic base oils.
Cross Oil completed a brief shutdown and a catalyst change at its 5,000 b/d naphthenic base oil plant in Smackover, Arkansas, back in September.
Next year, San Joaquin Refining has slated a three-week maintenance shutdown at its plant in Bakersfield, California, starting on Feb. 1. The plant can produce 8,100 b/d of naphthenic base oils.
Cross Oil and Calumet announced price increases of 20 cents per gallon on all naphthenic base oil grades, effective Nov. 4 and Nov. 3, respectively. The initiatives were driven by mounting crude oil, natural gas and other raw material prices, along with steeper costs in labor and freight.
Most naphthenic grades were said to be snug, but there were no shortages noted, and some of the cuts may become more available as demand for export volumes for destinations in Latin America has softened as there was improved availability of paraffinic grades.
On the paraffinic front, Chevron increased its posted prices on Oct. 19, lifting its API Group II base oils by 12, 15 and 20 cents/gallon, depending on the cut, to reflect market conditions.
It was heard that Chevron was planning to idle its Pascagoula, Mississippi, refinery in the second quarter of 2022 for a routine turnaround.
There were also reports that a second U.S. Gulf Group II plant was undergoing planned minor maintenance to complete a “catalyst rinse,” according to sources. It could not be ascertained when the plant would be restarted. The same unit was expected to be taken off-line for a longer turnaround in the third or fourth quarter of 2022. Another key Group II producer has also slated a turnaround and catalyst change for the third quarter of 2022. The turnaround information could not be confirmed with the producers directly.
It was interesting to note that several of these turnarounds had originally been planned for the first quarter of 2022, but were later delayed, which means that availability should be balanced to long early next year, depending on demand and whether there are any unexpected production issues.
Some suppliers continued to abstain from entertaining spot business due to limited volumes of certain grades, but others were looking at export opportunities to lower inventory levels and clear some of the extra volumes kept during the hurricane season, which was coming to an end. This year, emergency stocks were much lower than in years past, but the supply disruptions caused by tropical weather systems were also comparatively minor.
The heavy grades in the Group I segment were not as tight as a few months ago, but demand for the heavy grades was healthy and it has resulted in reduced availability of some cuts. Bright stock supply has improved noticeably from levels observed in the first half of the year, when both spot and posted prices jumped to historic highs. Spot numbers have softened on account of improved availability, weakening demand and a number of cargoes having moved to the U.S. Gulf from several ports in Western Europe and the Baltic.
The 200-230N and 600N grades within the Group II category also remained in limited supply compared to the lighter grades. However, demand for Group II grades for automotive lubricants may weaken in coming weeks as finished lubricant manufacturers prefer to work off of existing inventories ahead of year-end tax assessments. The lack of additives and other raw materials has also resulted in reduced rates at some blending facilities, which in turn has led to reduced base oil consumption.
Within the Group III segment, the 4 centistoke cut continued to be described as tight, whereas availability of the 6 cSt and 8 cSt grades was lengthening as plants in Asia, Europe and the Middle East have returned to full production and demand in those regions has declined, allowing for more product to be shipped to the U.S.
Lubricant manufacturers have also been facing increased pressure from climbing production costs, including the price of base oils. A number of lubricant suppliers have communicated price increases of up to 15% to be implemented in early December to offset the steeper operating costs.
A second key additive producer has announced a price increase of 9% for mid-November implementation, following the first announcement of an 8% markup by another manufacturer, which went into effect on Nov. 1, according to sources.
Upstream, crude oil futures edged up on encouraging signs of global economic growth. The price of U.S. benchmark West Texas Intermediate crude oil was hovering near its highest level since 2014, and well above 2020 values. Expectations of increased energy demand in the U.S. boosted futures, although there was talk that the country would be evaluating options to help lower oil prices.
There was also talk that global oil capacity could diminish next year as more passengers were expected to fly in coming months on the relaxation of travel restrictions, and this would lead to increased crude demand for jet kerosene production.
On Nov. 9, West Texas Intermediate December futures settled at $84.15/barrel, from $83.91/barrel on Nov. 2.
Brent futures for January delivery settled at $84.78/barrel on the CME on Nov. 9, compared to $84.72/bbl on Nov. 2.
Light Louisiana Sweet crude wholesale spot prices were hovering at $82.06/barrel on Nov. 8 and had settled at $84.28/bbl on Nov. 1, according to the Energy Information Administration.
Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.
Lubes’n’Greases Publications shall not be liable for commercial decisions based on the contents of this report.
Historic and current base oil pricing data are available for purchase in Excel format.