U.S. Base Oil Price Report

Despite a slight reduction in activity levels, demand for base oil remained steady, with supply in some segments appearing more well-balanced against requirements than others.

Orders in the API Group I segment were coming in at expected levels for this time of the year, and given the recent output reduction at one of the Group I plants and ongoing and imminent turnarounds at a couple of plants, supply was not as abundant as for Group II cuts, according to sources.

Calumets Group I and II plant in Shreveport, Louisiana, was undergoing a partial turnaround, which started about a week ago. The plant will be shut down in two different phases, with the current one only affecting the producers mid to heavy-vis cuts (325, 600, 2500 vis). The first stage is on schedule and will be completed soon, a company source noted. The second phase of the turnaround will impact the companys light-vis cuts (60, 80, 100, 150 vis) and will take place from Dec. 1 until Dec. 15. The turnarounds were not expected to affect shipments of base oils since Calumet had built inventories in advance of the turnaround.

HollyFrontier was also preparing to start a routine turnaround at its Group I unit in Tulsa, Oklahoma, this week, according to a company source. As a result of the turnarounds, Group I spot barrels have tightened, another source noted.

While there have not been any adjustments to posted prices, buyers commented that competitive activity continued among suppliers in the spot and export arenas. As a result, select discounts have been offered into a number of large accounts, depending on volumes and other conditions. Most markdowns were heard in a range of 10 to 12 cents per gallon, but this varied according to supplier and business terms.

Domestic demand has dwindled as compared to a month ago, and export opportunities into Europe were heard to have declined as lubricant production was crippled by a fire at the drumming and warehouse facilities that forced the temporary closure of the Lubrizol lubricant additives plant in Rouen, France. The company is on allocation, placing a damper on base oil demand, a source said. (For more details, see Lubrizol Working to Reopen Rouen Plant in this weeks issue of Lube Report EMEA).

At the same time, prospects in the domestic finished lubricant segment have improved as the General Motors strike has ended, and operations should resume this week. The six-week long strike had impacted demand for parts and lubricants as workers walked out of 34 factories, halting production for nearly 40 days. It cost GM $2 billion in operating profit, by some estimates, and the effects have rippled through the United States auto industry, as well as GMs operations in Canada and Mexico, The New York Times reported.

Base oil producers were keeping an eye on crude oil and feedstock prices, as numbers have been fairly volatile over the last few days, going up one day and falling the next.

On Tuesday, crude oil futures slipped for a second day, after moving up the previous week, pressured by expectations of an increase in U.S. crude inventories and skepticism that OPEC and its allies would trim output further in December. The OPEC+ members agreed to a supply cut of 1.2 million barrels per day until March, but the producers will meet on Dec. 5-6 to discuss whether to extend or revise the agreement. Reduced global oil consumption also weighed on prices.

On Tuesday, Oct. 29, West Texas Intermediate November futures settled at $55.54 per barrel on the CME/Nymex, and had closed at $54.16/bbl on Oct. 22.

Brent futures for December delivery were reported at $61.59/bbl on the CME on Oct. 29, and had closed at $59.70/bbl on Oct. 22.

Light Louisiana Sweet crude wholesale spot prices settled at $58.25/bbl on Oct. 28 and had closed at $56.03 on Oct. 21, according to the Energy Information Administration.

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