While a majority of U.S. paraffinic base oil suppliers agreed that demand had remained fairly stable over the last few weeks, there has been a slight decline in activity compared to the summer months, a condition that is not untypical for this time of the year.
Naphthenic base oil suppliers concurred that business had also been quiet, but steady. There was no product overhang noted, with supply described as generally balanced against demand.
The sense of stillness that pervaded the market was accentuated by the absence of many players who were attending the Independent Lubricant Manufacturers Association Annual Meeting in San Antonio, Texas, on Oct. 5-8.
One of the reasons for decreased buying appetite is consumers need to lower inventories ahead of the end of the year, sources said. As many buyers in the U.S. Gulf had beefed up stocks as a preventative measure in case production was forced to shut down during a hurricane, it was necessary to start using up the existing supplies, sources added.
It has been a mild hurricane season so far, with little damage reported to production facilities on account of tropical storms. The hurricane season in the U.S. Gulf typically runs from the beginning of June to the end of November, and everyone is hoping that the weather remains favorable for the rest of the season.
The latest weather system to affect operations was Tropical Storm Karen, which caused refiners to remove employees from offshore platforms in the Gulf of Mexico, shutting in more than 2.9 million barrels of crude production late last week.
However, BP and Chevron workers were able to return to the platforms as the storm was downgraded to a depression, with most operations resuming over the weekend.
In other Chevron-related news, the companys Richmond, Calif., refinery opened its gates to the public on Oct. 5 for the first time since an August 2012 fire that caused severe damage to the crude oil unit.
In its third annual Community Tour Day, the company strove to show that it had stepped up safety since the accident that sent about 15,000 area residents to local hospitals, many with respiratory problems, according to the local press.
Chevrons 20,700 barrels per day API Group II base oils unit in Richmond was shut down after the fire, and remained off-line until last May.
Chevron is also preparing to start up its new 25,000 barrels per day Group II base oils plant in Pascagoula, Miss. The company expects mechanical completion of the plant, which is referred to as “PBOP” (Pascagoula Base Oils Plant) by the end of the year. Market sources said that base stocks from the plant were likely to be commercially available in the first quarter of 2014, and that the product would be distributed not only in the domestic market, but also abroad through the companys worldwide supply network.
Upstream, the downward trend observed in West Texas Intermediate crude futures stalled over speculation that the partial U.S. government shutdown would be resolved shortly, preventing an expected decrease in oil consumption.
WTI settled on the CME/Nymex at $103.49 per barrel on Tuesday, Oct. 8, up $1.45 from last Tuesdays settlement at $102.04/bbl.
Brent crude was trading at around $110.16 per barrel late yesterday on the CME, up $2.22 from $107.94 a week ago.
LLS (Light Louisiana Sweet) was trading at a premium to WTI of around $4/bbl on Oct. 8, compared with $2.40/bbl on September 27.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.