U.S. Base Oil Price Report

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Flint Hills Resources stepped out with a price increase this week on the back of tight supply conditions brought by hurricane-related plant outages along the U.S. Gulf Coast.

Flint Hills notified customers it will be increasing its API Group II 70/75 and 110-vis oils by 11 cents per gallon, and its 220 and 600-vis grades by 14 cents/gal, effective Sept. 28.

The narrowing supply was said to be placing pressure on most base oil prices, but participants noted that the strongest pressure was felt in the Group II segment as supply was the tightest.

However, availability of Group I oils was also strained, causing spot indications in this tier to move up.

A majority of Group III oils utilized in the United States is imported, so there was less of an impact from the shutdowns on this category, sources added.

Meanwhile, numerous uncertainties continued to plague the base oil market, despite the fact that conditions were gradually returning to normal in many areas affected by the recent hurricanes.

A majority of refineries located in Texas, which had either been compelled to shut down ahead of the storms, or were idled later because of flooding, were heard to have restarted.

Sources commented that those units that had shut down operations as a precautionary measure appeared to have encountered fewer difficulties restarting than those that had shut down during the storm.

A few of these refineries house base oil plants, and the operating rates at these facilities varied at present, sources said.

There continued to be reports that ExxonMobils API Group I plant in Baytown, Texas, was running well, but that its Group II/II+ lines were running at reduced capacity, with the producers force majeure still in place. The Baytown unit has capacity to produce 9,800 barrels per day of Group I and 18,200 b/d of Group II oils, according to LubesnGreases Guide to Global Base Oil Refining.

No updates were heard regarding the force majeure on Motivas Group II base oils. The producers Port Arthur, Texas, refinery was understood to have restarted operations, but it was not clear whether the base oil trains were running as well. Motivas plant can produce 40,300 b/d of Group II base oils.

Buyers commented that the allocation program implemented by Motiva on its STAR base oils varied, depending on the account, contractual terms, type of transaction, and other conditions.

Domestic base oil buyers were heard to have secured base oil cargoes from alternative suppliers to ensure downstream lubricant production would not be interrupted if supply tightened further, while international companies who regularly source product from the U.S. were heard to be checking availability in other regions.

This was also the case for naphthenic base oils. Only two naphthenic base oil plants were in the path of Hurricane Harvey and had shut down – LyondellBasell and Valero – and operating rates at Calumets Princeton, Louisiana, naphthenic unit had been trimmed due to a slight shortage of incoming crude.

These production setbacks resulted in a narrowing of domestic availability of pale oils. Consumers have resorted to purchasing spot cargoes from sellers who are not their regular suppliers as well.

Logistical issues continued to hamper product shipments from and to the affected areas. A lack of railcars, together with port and terminal congestion, were heard to be impacting shipping schedules. Everyone is having issues securing crude as the terminals are still not completely operational, a source commented.

It was also heard that there was a shortage of truck drivers as the Federal Emergency Management Agency (FEMA) had hired many drivers away from commercial operations to work on recovery efforts.

In other production news, it was heard that Chevron had shut down its 55,000 b/d catalytic reformer at its 330,000 b/d Pascagoula, Mississippi, refinery on Sept. 22.

Upstream, crude oil futures finished lower Tuesday on expectations that U.S. data would show a fourth consecutive weekly rise in domestic crude inventories.

U.S. prices had jumped on Monday, driven in part by a threat from Turkeys president to cut off oil exports from a Kurdish region of Iraq.

On Tuesday, Sept. 26, West Texas Intermediate futures settled on the CME/Nymex at $51.88 per barrel, up $2.40/bbl from $49.48 per barrel on Sept. 19.

Light Louisiana Sweet wholesale spot prices closed at $58.22 per barrel on Sept. 25, up from $55.36/bbl on Sept. 18, according to data from the U.S. Energy Information Administration.

Brent was trading at $58.44/bbl on the CME on Sept. 26, up $3.30/bbl from $55.14/bbl on Sept. 19.

Low sulfur vacuum gas oil was at Nov WTI plus $12.50/bbl ($64.72/bbl) and high sulfur VGO was at crude plus $10.50/bbl ($62.72/bbl) on Sept. 25. In comparison, low sulfur VGO was hovering at $61.66/bbl and high sulfur VGO at $60.41/bbl on Sept. 18, according to data published by PetroChemWire.

Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.