U.S. Base Oil Price Report

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Many households and businesses were still recovering from the impact of Hurricane Ida, which battered large swaths of the Southeast and Northeast of the United States last week. While a majority of refineries and base oil plants in Louisiana and Mississippi suffered relatively minor damages, utility outages hampered the restart of many refinery, transportation and pipeline operations.

Thousands of customers in New Orleans and surrounding areas were still left without power this week. By Monday, regional power distributor Entergy had restored electrical service to approximately half of the estimated 950,000 customers who lost service after Hurricane Ida made landfall on Aug. 29. However, fully restoring electricity to some of the southeastern parishes could take until the end of the month, Entergy acknowledged on its website.

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The hurricane, which became a powerful tropical storm when it touched down in southeastern Louisiana, not only forced refineries and petrochemical plants located along its predicted course to shut down or reduce run rates, but it also caused port and terminal closures. Logistical and transportation issues were impacting shipments into and out of the affected areas, as the storm brought severe flooding, powerful winds and tornadoes that left a path of destruction in their wake.

A majority of the affected refineries and base oil plants have resumed output, although a few petrochemical plants were heard to remain shut down, which could impact the availability of additives and other chemical components for lubricants and finished products.

ExxonMobil’s refinery in Baton Rouge, Louisiana, which houses a 16,000 barrels per day API Group I unit and also produces esters, was understood to have first cut production to 50% capacity ahead of the expected start of the storm, but later shut down the whole refinery complex. However, the complex did not sustain significant damage and it was restarted a couple of days after the hurricane. On Sep. 2, ExxonMobil stated on its website: “We are currently in the process of starting up the Baton Rouge refinery and returning to normal operations as third-party utilities become available.”

Chevron’s base oil plant in Pascagoula, Mississippi, which can produce 25,000 b/d of Group II base oils, was not affected by the storm and was running well. “The Pascagoula Refinery continues to operate and supply products to our customers,” a source familiar with the company’s operations said. Chevron’s refining operations in the Gulf Coast were also unaffected by the outage of the Colonial pipeline during the storm.

Phillips 66, which operates the Excel Paralubes base oil plant in Westlake, Louisiana, reported on its website that its Lake Charles Manufacturing Complex in Westlake deactivated its hurricane preparedness plan and resumed normal operations on August 30. The Excel Paralubes plant in Westlake can produce 22,200 b/d of Group II base oils. The company’s Gulf Coast Lubricants Plant in nearby Sulphur was expected to reopen on Tuesday, Aug. 31. Phillips 66 had been forced to shut down the Lake Charles Manufacturing Complex and adjacent base oil plant after Hurricane Laura in August 2020.

Phillips 66’ Alliance Refinery in Belle Chasse, Louisiana, completed a safe and orderly shutdown of operations ahead of Hurricane Ida. The Alliance Refinery remained shut down, and Phillips 66 confirmed that there was some water in the refinery following the hurricane. Refinery officials have also been told to expect power to be restored by Sep. 10, according to Entergy.

There were no updates available about operations at Chevron Oronite’s additives plant in Belle Chasse.

Ergon’s refinery in Vicksburg, on the Mississippi River, was not impacted by the storm, the company said in a press release. “The refinery is fully operational and customers should not expect to see any disruptions through Ergon’s supply chain,” the statement noted. The refinery houses a 3,000 b/d Group I and 22,000 b/d naphthenic base oils unit.

The Motiva base oil plant in Port Arthur, Texas, which is located close to the Louisiana border and has capacity to produce 40,300 b/d of Group II and Group III base oils was heard to be running at normal rates, according to sources.

Port and terminal operations in Louisiana were affected by a lack of electric power and water supply. The Port of New Orleans resumed limited cargo and vessel operations, beginning with breakbulk vessel cargo, on Sept. 2. The port authorities said that “port crews, terminal operators and tenants continued to prepare facilities for the resumption of operations more broadly.”

Stolt-Nielsen, which operates a key terminal for the distribution of API Group III imports to the U.S., declared force majeure at its Stolthaven terminal near New Orleans due to the storm. Officials said the terminal was undamaged, but that its power and water supplies had been knocked out. The terminal operator expected marine operations to resume last weekend, and the terminal’s own operations were likely to resume this week, although at a reduced capacity, Philip Watt, the terminal’s general manager said.

One of the companies affected by the Stolthaven disruptions was global supplier and distributor Penthol, which markets Adnoc’s Group III base oils in the U.S. The company issued a statement on Sept. 3, explaining that terminal operations should be resuming in the next few days. “Our terminal in New Orleans has made progress towards a return to normalcy,” Kenyon Terrell, director, supply chain & logistics at Penthol noted in the statement. “Marine operations have commenced today in a limited capacity. Labor and safety permitting, we look to commence land-based operations on Tuesday, September 7. This is certainly welcome news. We ask that our valued customers continue to be patient with us as we are working under contingency conditions. Power is still out for much of the Greater New Orleans region.” The company also commented that it had largely avoided having to declare force majeure on base oil shipments.

In terms of transportation, rail operator Union Pacific said on Friday that it had reopened its route from St. James to New Orleans, but that generators remained in place for signal and gate operations until commercial power was restored.

On its website, Union Pacific said that the interchange with Norfolk Southern resumed on Thursday evening, but interchange with all other carriers in New Orleans remained under embargo. Interchange operations were not allowed during the city-mandated curfew from 8:00 p.m. to 6:00 a.m. Union Pacific’s Avondale, Louisiana, intermodal terminal was expected to remain closed until further notice.

Union Pacific also stated that due to flooding associated with Hurricane Ida in the Northeast, Norfolk Southern had issued embargoes impacting intermodal shipments on their network.

CSX, another rail operator, experienced disruptions in portions of Pennsylvania, New Jersey and New York and repair work on track and signals on the New Orleans and Mobile lines were ongoing.

Shipments that were scheduled to move in and out of any of the affected areas by rail were expected to be delayed by several days, market sources commented.

As far as barge transportation was concerned, the U.S. Coast Guard reopened the lower Mississippi River to nearly all vessel traffic, although some key areas remained closed due to damage assessments and recovery operations. Sources also noted that products shipped by barge on the Mississippi River would likely suffer delays.

In pricing, Motiva increased its Group III postings on Aug. 26, but left its Group II prices unchanged. The company lifted the posted price of its Group III 4 cSt grade by 55 cents per gallon and the 6 cSt grade by 50 cents/gal.

Driven by healthy demand and strained supply, Petro-Canada also increased its posted prices by 55 cents/gal across the board for its Group III 4, 6 and 8 cSt base oils as of Sept. 7. Postings for the company’s Group II and Group II+ cuts remained intact. The producer fielded interest from buyers looking for additional Group III cargoes last week, as shipments from other suppliers were expected to suffer delays due to hurricane-related disruptions.

Downstream, several lubricant and finished products manufacturers have announced increases for September implementation, with the objective of offsetting the markups in base oil pricing and other climbing costs since the beginning of the year.

Old World Industries announced that a lubricant price increase was scheduled to go into effect on Sep. 13. The company intends to lift the price of its full synthetics by up to 13% for packaged and bulk product. Synthetic blend heavy-duty engine oils in package and bulk will rise by up to 7%, and the price of other packaged products will go up by up to 5%. The increases were said to be driven by steep base oil prices that have continued to rise over the last several months on the back of tight conditions, along with substantial cost increases of resin, corrugate, steel, pallets, supplies, transportation and labor.

Upstream, crude oil prices extended their downward trend on Tuesday as Saudi Arabia cut crude contract prices for Asia, fueling concerns that the move was in response to lower demand, but strong Chinese economic data and U.S. output outages due to Hurricane Ida capped losses.

West Texas Intermediate (WTI) October futures settled at $68.35/barrel on Sep. 7, from $68.50/bbl on Aug. 31.

Brent futures for November delivery settled at $71.69/bbl on the CME on Sep. 7, from $72.99/bbl for October futures on Aug. 31.

Light Louisiana Sweet crude wholesale spot prices were hovering at $71.84/bbl on Sep. 3, from $70.68/bbl on Aug. 30, according to the Energy Information Administration (There was no trading on Sep. 6 due to the Labor Day holiday in the U.S.)

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.

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