U.S. Base Oil Price Report

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A majority of paraffinic base oil producers implemented posted price increases between Sept. 7 and Sept. 21. The increases were said to have been driven by a tightening supply-demand scenario, climbing spot prices, and firm crude oil and feedstock values over the last several weeks.

Producers’ initiatives raised prices by 15, 20, 25 and 30 cents per gallon, depending on the grade and the supplier, with API Group I bright stock experiencing the largest boost given limited global availability of this cut.

This week, Avista Oil will lift its Group II+ 150-vis grade by 20 cents/gal, with an effective date of Sept. 21.

This was also the second time that ExxonMobil and Avista Oil lifted postings in about a month, as similar markups were implemented by the producers in early August. There have been conflicting accounts about ExxonMobil’s increases, which went into effect last week, as some buyers reported increases for the light and mid-vis grades and others did not.

As a result of the latest base oil price hikes, a number of independent lubricant blenders intend to raise finished lubricant prices by 32-40 cents/gal, or about 8-14 percent in early October. This move has prompted an uptick in orders by consumers trying to beat the increase implementation, sources said. However, suppliers wondered whether the trend would be sustained next month.

The tight base stock supply conditions in the United States were attributed to steady domestic demand in June, July and August; brisk export transactions during the same period, and unexpected production issues brought about by severe weather on the U.S. Gulf Coast, where a large number of base oil plants are located.

In late August, Hurricane Laura forced the Excel Paralubes Group II plant to halt production, as it damaged the power grid around Lake Charles, Louisiana, where the plant is located. The base oil plant was heard to remain off-line as the company was striving to restore power and repair any structural damage incurred during the hurricane.

The Excel Paralubes plant is located in the Phillips 66 refinery complex and the company predicted that power supply would be fully restored in two weeks. However, while the refinery needs to undergo a series of repairs, including extensive work on a cooling tower that may take up to three months, the base oil plant appeared to have pulled out of the hurricane fairly unscathed. The issue appeared to be that the base oils plant was unable to receive feedstock supply from the refinery. Sources added that the company had been able to load base stocks in trucks out of storage units near the base oil plant, and railcar shipments were anticipated to resume in the next few days. Barge shipments were not expected to restart until further repairs to the facilities were completed. Excel Paralubes and Phillips 66 did not participate in the latest round of price increases.

According to an online press release, Phillips 66 had applied its logistics capabilities to get help to its employees affected by Hurricane Laura, and was also contributing $750,000 to the American Red Cross to support the relief efforts in its communities. Phillips 66 has nearly 1,000 employees who work at its numerous assets in the area, including the Lake Charles Manufacturing Complex, the Gulf Coast Lubricants Plant in Sulphur, Louisiana, and pipelines and terminals, including Clifton Ridge, Westlake and Pecan Grove.

Motiva‘s Group II plant in Port Arthur, Texas, also suffered a power outage and had to shut down refinery operations during Hurricane Laura, but was able to restart a few days after the shutdown began because the company has its own power supply source.

Last week, another tropical storm, Hurricane Sally, threatened to disrupt production at plants in Louisiana and Mississippi. However, a majority of the base oil facilities in the area, including Chevron’s Pascagoula, Mississippi, refinery, Ergon’s refinery in Vicksburg, Mississippi, and Calumet’s base oil units in Princeton and Shreveport, Louisiana, were not affected by the storm and were operating at normal rates this week, according to sources familiar with the plants’ operations.

And true to predictions that this year was going to see an active hurricane season, another tropical weather system, Tropical Storm Beta, started to pound the Texas coast with torrential downpours and a storm surge on Monday night, posing the threat of significant flash flooding in the region.

It was not clear whether any base oil plants in Texas had reduced operating rates as a preventative measure ahead of the storm. Sources said Motiva appeared to be operating at normal rates and might be able to continue truck and rail shipments if there was no flooding.

The Houston Ship Channel was closed, as was the Intracoastal Waterway due to the storm. Sources anticipated the Port of Corpus Christi, Houston, Texas City, Victoria, Freeport and Galveston to remain closed for three to four days, causing a back-up in shipments and deliveries. 

Upstream, crude oil futures drifted lower on Tuesday morning as Tropical Storm Beta seemed to be weakening, and Libya expected to restart oil production and exports. China’s imports of crude oil have been trending much lower in September than in the past four months, while the rest of Asia is also significantly reducing imports this month. However, futures moved up on Tuesday afternoon as a larger-than-expected gasoline draw offset growing U.S. crude inventories.

A new wave of rising coronavirus cases could cause several countries, including the United Kingdom, France, Spain, and Israel to implement lockdown measures, and reduce oil demand. Meanwhile, the US will likely surpass 200,000 total reported deaths on Tuesday as it approaches 7 million total cases, according to a Johns Hopkins University report.

On Tuesday, Sept. 22, October WTI futures settled at $39.60 per barrel on the CME/Nymex and had closed at $38.28/bbl on Sept. 15.

Brent futures for November delivery closed at $41.72/bbl on the CME on Sept. 22, from $40.53/bbl on Sept. 15.

Light Louisiana Sweet crude wholesale spot prices settled at $40.51/bbl on Sept. 21 and closed at $38.73/bbl on Sept. 14, according to the Energy Information Administration.

Vacuum gas oil (VGO) was trading at WTI plus $6/bbl (or $45.60/bbl) on Tuesday, Sept. 22, and traded at $44.28/bbl on Sept. 15, according to OPIS/PetroChem Wire assessments.

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.

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