U.S. base oil supply/demand fundamentals are largely unchanged from recent weeks. Overall availability is balanced-to-tight, while demand is meeting or surpassing suppliers expectations. Cross Oil plans to push up naphthenic prices by an average of 10 cents per gallon or to meet internal postings on several heavy vis grades.
Sellers say that buying interest continues to build and that February, and even to some extent March, sales are improved over January volumes. Sellers agree that overall volumes are much beefier compared to a year ago.
Meanwhile, base oil suppliers continue to pay careful attention to upstream developments. Although crude values have traded in a fairly narrow range of $89 to $91 per barrel for the past two weeks, some energy experts anticipate oil may gain upward momentum and head higher in coming months. Crude did reach a high at over $92/bbl recently before it lost some steam and slipped back around $87/bbl on Monday.
Vacuum gas oil values have sustained a fairly sizeable premium to crude prices, around $10 to $14 per barrel, for some weeks. VGO is an essential feed stock and therefore often a key factor in the pricing of base oils.
Even though paraffinic suppliers raised prices in early December by an average of 25 to 30 cents per gallon for most grades, some players speculate that another increase could be forthcoming given current market fundamentals – healthy demand, snug availability and sustained lofty feedstock costs. Some producers also contend that margins are inadequate.
The naphthenic arena may be experiencing upward pressure more severely than the paraffinic side, as many producers are in very tight supply situations. Cross Oil alerted all its customers that it will push up prices for two heavy vis grades (2000 and 2400) to levels to match internal postings or by an average of 10 cents per gallon, effective Feb. 1.
Also adding pressure to the naphthenic arena is a series of planned outages which have assisted in tightening up supplies alongside buoyant demand. On Jan. 22, San Joaquin Refinery commenced a two-week turnaround for its crude unit and solvent extraction plant, which will impact heavy vis pale oils. The company advised that its hydrotreater will stay online until April 1, when it will shut down for three weeks for a catalyst change, impacting the production of light vis products.
On Feb. 5, Cross Oil has scheduled a three-week turnaround to get underway at its 5,000 b/d naphthenic facility in Smackover, Ark. The company continues to prepare its stocks in advance of this maintenance.
Calumet plans to take its Princeton, La., naphthenic plant offline on April 10 to perform a normal maintenance turnaround program. Princeton should be down for about 10 days. (On Feb. 13, Calumet will also enter a turnaround at its Shreveport, La., paraffinic facility for a catalyst change.)
Lyondells Houston Refining underwent a five-day turnaround last week to rectify an operational problem that the plant experienced in late November. The refinery has 1,000 b/d of API Group II and 3,600 b/d of naphthenic capacity. After running at about 66 percent, the facility has resumed full rates as of this past weekend, according to sources.
In other news, according to the Texas Commission on Environmental Quality, ExxonMobil reported that its Baytown plant in Texas had emissions from the Lube Extraction Unit No. 2 as it brought the unit down for a pinhole leak on Jan. 22. The unit was shut down to mitigate the leak. No further details could be ascertained.
At the close of the Tuesday, Jan. 25, NYMEX session, light sweet crude futures ended at $86.19 per barrel, a loss of $5.19/bbl compared to the Jan. 18 settlement at $91.38/bbl.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.