The hurricane became stronger as it moved to the Gulf of Mexico, with powerful winds and torrential rains battering Houston and surrounding areas on Monday morning, causing flooding, knocking out power for millions of households, and leaving three casualties.

Extensive power outages were still a problem in Texas by Tuesday afternoon, and a few producers were inspecting facilities to ensure safe operations before a full restart. At the time of writing, reports suggested that damage to base oil facilities had been limited, but some ports remained closed on Tuesday. BWC Terminals, which services many companies moving bulk liquids out of Houston, declared force majeure due to a lack of electric power.

BWC informed customers that Beryl had caused significant disruption to the power grid servicing its Houston facilities and as a result, the company had issued a force majeure, effective July 9, for all rail, truck and marine operations in and out of the Magnolia Park Terminal. BWC added that it would continue to maintain staff onsite to expedite the terminals’ return to service and termination of the force majeure as soon as the company was able to return to normal operations.      

The hurricane was not the only weather event to pose a risk to plant operations. The extreme heat experienced in many areas over the last several days had also forced producers to run refineries at reduced rates.

Producers who operate refineries and petrochemical plants along the projected path of the storm had implemented emergency plans as a precautionary measure ahead of the hurricane. Structural damages so far appear to be minimal. “All reports say there’s been no real damage,” a market source commented.

Calumet had put a storm preparedness plan into place at its Louisiana facilities and did not report any significant impact. “Last update yesterday was that everyone was safe. The plant experienced some power blips, but we expect to recover without any issues,” a company source noted.

The Excel Paralubes Group II plant in Lake Charles, Louisiana, had been taken off-line for maintenance in mid-June and was heard to have restarted operations early last week. It was not immediately clear whether the plant had been shut down again ahead of the hurricane later in the week. While the producer had restricted spot business, it had met contractual obligations as scheduled, sources said.

ExxonMobil was reported to have started hurricane preparedness plans at its refineries in Beaumont and Baytown, Texas, and Baton Rouge, Louisiana, last Friday. Only the Baytown and Baton Rouge sites house base oil plants. No further updates were available by the publishing deadline.

The ports of Houston, Corpus Christi, Galveston, Freeport and Texas City closed ahead of the storm’s landfall and some remained closed, while the Corpus Christi Ship Channel that leads to the Port of Corpus Christi – the country’s top crude oil export hub – reopened on Monday afternoon after suffering no significant impact from the storm, OilPrice.com reported. According to sources, the Houston Ship Channel had been closed until Tuesday, June 9, and was under review on Wednesday morning. Vessel traffic was expected to resume first, possibly on June 10, followed by barge traffic on June 11

Additionally, BNSF Railway began restricting rail operations in Texas on Sunday, with restrictions and closures expected to remain in place until July 8, causing possible delays and extended transit times this week, OPIS reported. Trucking operations were also anticipated to be affected by flooding and the need to keep trucks off the road during the storm.

Participants expressed concern at the possibility of base oil supply disruptions at a time when base oils were generally tight in the US, although many players had bolstered inventories ahead of the hurricane season.

Supplies of API Group I and Group II grades had tightened in June precisely because of inventory-building efforts, coupled with maintenance programs at a couple of plants, healthy domestic demand and fairly vigorous export activity.

The Group II light grades have been less available because of a brief turnaround at Motiva’s plant in Port Arthur, Texas, in May and the recent shutdown at Excel Paralubes’ plant in Louisiana previously mentioned.

The Group I segment has also been snug because of a short maintenance program at Paulsboro’s Group I plant in New Jersey in May and steady demand for most grades, particularly bright stock, which has been in short supply not only in the Americas, but in Europe and Asia as well.

Suppliers reported healthy buying interest from Europe, West Coast of South America and Brazil.

Mexican buying interest remained robust as well, with some buyers holding off on purchases in hopes of achieving lower prices, but many closing business at current levels to ensure supply continuity. It was not clear whether Hurricane Beryl would have any impact on shipments moving through Brownsville, Texas.

Brazilian appetite for US base oils has softened compared to earlier in the year, but domestic supplies were not deemed sufficient to meet product needs and buyers were therefore on the lookout for imports. A local producer has raised its domestic prices, turning US offers more competitive, but there have also been discussions to move Asian base oils to Brazil. There was also mention about a Group II shipment possibly moving to the US Gulf from South Korea next month on expectations of continued tightness in the US.

The Group III segment was balanced-to-tight in the US, with demand for some grades having picked up the pace in recent weeks and a shipment delay of imported Middle Eastern products limiting supplies of some grades, according to sources.

On the naphthenic base oils front, the light grades were tight given healthy consumption from the transformer oil and adhesives segments. The heavier grades were less sought-after, but business was still constant, suppliers said. Brisk exports to Europe, Asia and Latin America helped keep the domestic market from getting oversupplied.

Participants reported no posted price changes for paraffinic base oils and stable pricing for naphthenic cuts but acknowledged that tightening supplies and climbing crude oil prices were placing pressure on prices. Paraffinic spot prices have also shown a small uptick from the previous week, with the Group I and Group II grades edging up by around $0.05 per gallon, and the Group III 6 centiStokes and 8 cSt also showing a $0.05/gal upward adjustment.

Aside from shipping delays and platform evacuations, Hurricane Beryl seemed to have had a relatively small impact on refinery operations and offshore platforms. Last week, crude oil values had continued their relentless upward trek, with the West Texas Intermediate (WTI) benchmark gaining about 2%–its fourth straight weekly gain–and jumping over the $83 per barrel mark.

Oil futures ticked up on Monday on expectations of potential supply disruptions as Beryl made landfall in Texas. However, by Tuesday afternoon, it became evident that oil operations had suffered minimal damage, leading to a price retreat.

On July 9, West Texas Intermediate August 2024 futures settled on the Nymex at $81.41 per barrel, compared with $82.81/bbl on July 2.

Brent futures for September 2024 delivery were trading on the ICE at $84.66/bbl on July 9, compared with $86.56/bbl on July 2.

Louisiana Light Sweet crude wholesale spot prices were hovering at $86.23 per barrel on July 8, from $87.60/barrel on July 1, according to the US Energy Information Administration.

On the finished lubricants’ front, manufacturers were still facing lean margins on account of higher base oils and additives prices and difficulties in implementing increases of their own. Competitive price activity and expectations of slowing lubricant demand as the peak season wraps up in the U.S. in late July hampered the proposed increase initiatives and placed pressure on values.

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.

Archived base oil price reports can be found through this link: https://www.lubesngreases.com/category/base-stocks/other/base-oil-pricing-report/

Historic and current base oil pricing data are available for purchase in Excel format.