The consensus at the ICIS Pan American Base Oils & Lubricants Conference in Jersey City, New Jersey, last week was that base oil supply was still abundant in the United States, but inventories were more manageable than expected for this time of the year when demand tends to decline.
While availability of most grades was deemed ample to cover current requirements, some cuts were less readily available than others, sources said.
The API Group I cuts were on the snug side due to recent turnarounds, combined with fairly steady demand, while Group II suppliers have achieved a more balanced scenario thanks to some spot and export transactions concluded over the last couple of months. This has allowed suppliers to maintain posted prices on a steady course, although the current situation was partly achieved backstage through incentives such as discounts and temporary competitive allowances on market price transactions. These moves have diminished over the last couple of weeks as the product overhang has been reduced. "It's very quiet on the pricing front right now," a source agreed.
On the paraffinics front, supply in the Group I segment has been limited by a recent turnaround at HollyFrontier's Tulsa, Oklahoma, plant, and an ongoing turnaround at Calumet's Group I/II unit in Shreveport, Louisiana, which has been carried out in two phases.
The first phase, which affected Calumet's mid- to heavy-vis cuts (325, 600, 2500 vis) was completed in early November, and the second phase, which started on Dec. 1, affected output of the light-vis cuts (60, 80, 100, 150 vis) only. The turnaround was proceeding as scheduled and the plant was anticipated to be up and running by the end of next week, a company source said. The producer had built inventories to cover contract agreements, but was not actively participating in the spot market.
The Group II segment was likely to see little effect from a turnaround that was understood to be scheduled at one of the trains at Motiva's Port Arthur, Texas, Group II and Group III plant, starting in February, since the producer has other trains that will continue to run.
The naphthenics segment was described as fairly balanced, with demand deemed generally steady in the fourth quarter. This segment was expected to tighten in the first quarter of next year as Ergon was heard to be planning a routine turnaround at its plant in Vicksburg, Mississippi, starting in March. The plant has capacity to produce 22,000 barrels per day of naphthenic oils, according to Lubes'n'Greases'Guide to Global Base Oil Refining.
There were also reports that LyondellBasell had shut down its naphthenic base oils plant in Houston, Texas, in late October, and there was no indication as to when the plant would be restarted. The unit can produce 3,600 b/d of naphthenic base oils and 1,000 b/d of Group II oils. No producer confirmation was forthcoming about the upcoming shutdowns.
Upstream, crude oil futures were fairly flat on Tuesday afternoon, after sliding earlier in the day, with West Texas Intermediate registering its best weekly performance since mid-September and posting strong gains of 6.7 percent. OPECs announcement that it would implement further production cuts, effective Jan. 1, was seen as a move to stabilize oil prices and counter prospects of oversupply in global markets. Analysts were also waiting for the Federal Reserve's monthly rate decision on Wednesday; a vote of confidence in the economy from the Fed could boost crude prices, they said.
On Tuesday, Dec. 10, West Texas Intermediate January futures settled at $59.24 per barrel on the CME/Nymex, and had closed at $56.10/bbl on Dec. 3.
Brent futures for February delivery were reported at $64.34/bbl on the CME on Dec. 10, and had closed at $60.82/bbl on Dec. 3.
Light Louisiana Sweet crude wholesale spot prices settled at $62.59/bbl on Dec. 9 and had closed at $59.97 on Dec. 2, according to the Energy Information Administration.
(Please note: The VGO prices that appear on this report will be temporarily suspended until arrangements with a new provider of the daily quotes are finalized).
In other news, Mexican market participants were keeping an eye on developments concerning the United States-Mexico-Canada Agreement- or USMCA - which is based on the North American Free Trade Agreement that originally came into effect on January 1, 1994. U.S. House Speaker Nancy Pelosi said Democrats were close to an agreement with the administration that would lead to a vote in Congress on a renegotiated trade agreement, the Wall Street Journal reported. U.S. as well as Mexican and Canadian participants hope that the new agreement would encourage increased base oil and lubricant business between the three countries as certain trade rules would hopefully be clarified.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase inExcel format.