Operational problems are hampering base oil production at ExxonMobil’s Baytown, Texas, refinery, putting the squeeze on a Group II-plus market that was already tight. Sources say the company– the largest U.S. supplier of Group II-plus –has put customers on allocation and may have to maintain the limits until June.
“Because of the timing, this is having a tremendous impact,” a base oil buyer said last week. “The whole specialty base stock market has been maxed out for quite a while anyway, so this really makes things tight.”
The largest of ExxonMobil’s three Gulf Coast base oil refineries, Baytown has capacity to produce 20,000 barrels per day,9,800 of it Group I and the restpremium stocks.Earlier this year the refinery underwent a maintenance turnaround that the company had postponed from last fall in hopes of avoiding supply shortages. Observers have said the market tightened anyway, partly because motor oil blenders have been increasing their use of Group II-plus. In addition, Motiva, one of two other North American producers of Group II-plus, underwent a scheduled turnaround at its Port Arthur, Texas, plant.
Normally, ExxonMobil would have been running Baytown at full-tilt after the shutdown, in order to rebuild inventories. According to sources, however, the company disclosed in mid-April that a crude unit failure was hampering production. Sources said ExxonMobil was putting customers on allocation which, under a worst-case scenario,could last into June.
ExxonMobil told Lube Report that it has limited deliveries of its EHC 45 Group II-plus product as well as its 600 SN and bright stock Group I products.
From the perspective of buyers, the situation is exacerbated by the fact that base oil demand has been on an upswing in recent weeks. Winter is typically the slowest season of the year for lubricant blending, but spring is usually the busiest, with motor oil suppliers running promotions and ramping production for the spring and summer peak driving seasons.
Observers said Motiva has tried to help alleviate the situation by cranking its Group II-plus production beyond optimum levels. Some buyers are also looking for supply from the continent’s other Group II-plus supplier, Petro-Canada. Still, sources said blenders are watching their Group II-plus inventories dwindle below comfortable levels.
” I don’t think it will necessarily shut anyone down,” a buyer said.”But it’s going to place a lot of customers in an uncomfortable position.”
Crude oil pricesclosed at $25.35 per barrel on theNew York Mercantile Exchange yesterday, down from $27.96 a week earlier. Paraffinic posted prices were unchangedfor the week.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.
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