U.S. Base Oil Price Report

Despite concerns about possible production outages caused by Tropical Storm Imelda in Texas, most base oil plants were reported running at normal rates and no product shortages were noted.

Motivas base oil plant in Port Arthur, Texas, was not affected in any significant way by the flooding caused by the torrential rain, a source familiar with the companys operations said. The only setback was that shipments made by truck were cancelled on Thursday due to the heavy precipitation. The plant has capacity to produce 40,300 barrels per day of Group II and III base oils.

Likewise, the LyondellBasell facilities in Houston, Texas, which house a 1,000 b/d Group II base oils and 3,600 b/d naphthenic base oils plant, did not experience any issues related to the storm, a company source confirmed.

The ExxonMobil refinery in Beaumont, Texas, was heard to have idled some of its operations temporarily, but there has not been any base oil production at that site since 2016.

Aside from some anxiety related to severe weather conditions, there were few changes in the market, as many participants were away at the Independent Lubricant Manufacturers Association meeting taking place in Colorado Springs, Colorado, Sept. 21-24.

A hot topic within the base oils market continued to be crude oil prices, which spiked following the drone attacks on Saudi Arabian crude oil facilities on Sept. 14, but have retreated as analysts weighed the impact of the ongoing United States-China trade tensions on global growth against current supply concerns. Geopolitical tensions in the Middle East also dampened sentiment.

There were reports that a delegation of Chinese trade negotiators had sought to reschedule their planned trip to the farming regions in the U.S., while news emerged on Monday that U.S. officials had requested for the trip to be delayed, according to media reports.

On Tuesday, Sept. 24, West Texas Intermediate futures settled at $57.29 per barrel on the CME/Nymex and had closed at $59.34/bbl on Sept. 17.

Brent futures for November delivery were reported at $63.10/bbl on the CME on Sept. 24, and had closed at $64.55/bbl on Sept. 17.

Light Louisiana Sweet crude wholesale spot prices settled at $62.72/bbl on Sept. 23, and had traded at $67.40 on Sept. 16, according to the Energy Information Administration.

Low sulfur vacuum gas oil and high sulfur VGO were at Nov. WTI plus $13.75/bbl ($70.84/bbl) on Sept. 23. By comparison, low sulfur VGO and high sulfur VGO were both hovering at $75.65/bbl on Sept. 16, according to data published by OPIS PetroChemWire.

In automotive market news, as mentioned last week, General Motor workers continued to strike across the United States, not only affecting the automaker, but also disrupting operations of the companys suppliers across the U.S.

Hundreds of workers have been temporarily laid off at two companies in Michigan that supply parts to GM, as the walkout by 46,000 union workers at GM heads into a second week, and many more suppliers could be affected, including lubricant manufacturers, sources commented.

GMs use of temporary workers, potential plant closures and the lack of promotion opportunities are among the issues being negotiated in the first walkout against the automaker since 2007.

In other news, as the deadline approaches for the implementation of the new International Maritime Organizations regulations that call for reduced sulfur content in marine fuels, more refiners are becoming active players in the bunker fuels market. This causes some concern to base oil market participants as the price of marine fuels is likely to increase, drawing feedstocks into that segment that would otherwise be utilized for other products such as base oils.

Brazilian refiner Petrobras announced that as of Oct. 1, it would reduce the maximum sulfur content on its bunker sales from 3.5 percent to 0.5 percent in order to meet the new global requirements to be put into effect on Jan. 1, 2020, according to LiveBunkers.com. Petrobras produces and refines sweet crude grades, which are required to manufacture the low sulfur fuels.

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