Following several increase initiatives and recent plant outages, the U.S. base oil business strove to resume its usual rhythm, but activity slowed down slightly on Oct. 13-17 as numerous participants convened at the 2017 ILMA Annual Meeting in Orlando, Florida.
Supply in most market segments continued to be characterized as tight, both on the paraffinic and naphthenic sides, as several base oil plants along the U.S. Gulf Coast were able to restart production only recently after unexpected shutdowns caused by Hurricane Harvey.
The snug conditions, in combination with steeper crude oil numbers – West Texas Intermediate futures climbed from around 47 dollars per barrel in mid-August to over 50 dollars in early October – led a number of producers to seek upward price adjustments between late September and early October.
On the paraffinic side, Flint Hills Resources, Chevron, Phillips 66, and Kleen Performance Products announced increases in the realm of 10 to 14 cents per gallon for Group II and Group II+ oils, depending on the producer and the grade, with effective dates between Sept. 28 and Oct. 9.
Most of the production struggles affected Group II supply, and therefore the increases concentrated in that segment of the market.
Prices in the Group I sector were also exposed to upward pressure as some grades can be used to replace Group II oils in a number of applications, but producers were evaluating conditions and have not announced any price adjustments.
On the naphthenic front, Ergon, Cross Oil, Calumet and San Joaquin Refining nominated increases of 15 to 20 cents/gal for their pale oils, with varying implementation dates slated between Oct. 6 and Oct. 12.
Two major refiners on the U.S. Gulf, ExxonMobil and Motiva, were in the process of restoring production rates at their paraffinic base oil plants, after being forced to shut down due to hurricane-related flooding and declaring force majeure on base oil production.
However, it was still uncertain how long it would take for all of the producers requirements to be fulfilled as scheduled. For the time being, the suppliers continued to follow an allocation program and focused on meeting contractual obligations, while abstaining from spot business, according to sources.
On the naphthenic side, suppliers also mentioned limited supply given recent plant outages at Valeros Three Rivers, Texas, plant and LyondellBasells Houston, Texas, unit, together with reduced output at Calumets Princeton, Louisiana, facility. The plants were also heard to be in the process of restarting and ramping up production rates.
Calumet was also expected to shut down its Shreveport, Louisiana, paraffinic base oil plant on Oct. 15 for a scheduled turnaround. The plant will remain off-line for two weeks, and the producer plans to continue to cover contractual requirements from existing inventory during the outage. The Shreveport unit has capacity to produce 4,800 b/d of Group I, 6,600 b/d of Group II, and 400 b/d of Group III oils.
In other market news, Saudi Aramco Base Oil Company (Luberef) is anticipated to start commercial supply of Group II base oils by late December or early January 2018, a source familiar with the companys operations noted during the 14th ICIS Middle Eastern Base Oils and Lubricants conference in Dubai, United Arab Emirates, on Oct. 9-11.
The producer completed an expansion at its Yanbual Bahr, Saudi Arabia, plant that added Group II capacity, along with increased capacity for bright stock, and was anticipated to stabilize output and produce on-spec Group II base oils in late November or early December, the source said. The Yanbu plant has capacity to produce 3,500 barrels per day of Group I and 14,200 b/d of Group II oils, according to LubesnGreases Guide to Global Base Oils Refining.
Upstream, crude oil futures retreated on Tuesday after moving up as expectations of high U.S. production and exports offset concerns that fighting between Iraqi and Kurdish forces could threaten the countrys crude output. Iraqi forces have taken control of northern oil fields from the Kurdish government, and officials said that oil fields in the region were operating normally.
On Tuesday, Oct. 17, West Texas Intermediate futures settled on the CME/Nymex at $51.88 per barrel, up 96 cents/bbl from $50.92 per barrel on Oct. 10.
Light Louisiana Sweet wholesale spot prices closed at $57.76 per barrel on Oct. 16, up from $55.23/bbl on Oct. 9, according to data from the U.S. Energy Information Administration.
Brent was trading at $57.88/bbl on the CME on Oct. 17, up $1.27/bbl from $56.61/bbl on Oct. 10.
Low sulfur vacuum gas oil was at Nov WTI plus $14/bbl ($65.87/bbl) and high sulfur VGO was at crude plus $10.75/bbl ($62.62/bbl) on Oct. 16. In comparison, low sulfur VGO was hovering at $63.58/bbl and high sulfur VGO at $60.33/bbl on Oct. 9, 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.