Although not as sluggish as some years past, the U.S. base oil market is showing signs of the year-end doldrums. Consumers hint that producers are fairly laid back and are not eager to hold a December fire sale.
This is not to say there are no deals to be found, sources acknowledged, because there are. A few sellers have been spotted offering one or two grades at slightly discounted prices, buyers said. They go on to suggest that these offers are no real bargains, while further admitting these deals are only available before years end.
For now, players largely agree that overall supply is balanced, but this situation could be threatened during the first quarter.
A number of maintenance programs are expected to take place during the first three or four months of 2011. Sources say two or three major refiners are planning to take their plants offline for turnarounds, with some outages more extensive than others. A few other shorter downtimes are scheduled as well. These projects will impact the supply of both paraffinic and naphthenic base stocks.
Lyondells Houston Refining Co., with 1,000 barrels per day of API Group II and 3,600 b/d of naphthenic capacity, had an untimely operational interruption in late November. This resulted in reduced production of the companys line-up of pale oils. Inside sources say that output has since been and will remain about 66 percent of capacity through mid-January, when an emergency turnaround is hoped for.
San Joaquin Refining has scheduled a two-week turnaround starting Jan. 22 for its crude unit and solvent extraction plant, which will impact heavy vis pale oils. The company advised that its hydrotreater will stay online until April 1, when it will shut down for three weeks for a catalyst change, impacting the production of light vis products.
Cross Oil is scheduled for a three-week turnaround at its 5,000 b/d naphthenic facility in Smackover, Ark., in early February. The company is already in the early stages of beefing up stocks ahead of this maintenance.
Meanwhile, as crude oil values continue to dance around the $90 per barrel mark, some base oils consumers fear that posted prices could be pushed up again. Their concerns follow a recently initiated round of paraffinic price hikes implemented earlier this month. Naphthenics moved to higher levels in November.
Sources say that base oil suppliers were compelled to lift prices due to rising feedstock costs and skimpy availability.
At the close of the Tuesday, Dec. 14, NYMEX session, light sweet crude futures ended at $88.28 per barrel, a marginal loss of 41 cents compared to the Dec. 7 settlement at $88.69/bbl.
Please note: Early editions last week incorrectly reported the increase in ExxonMobil’s posted price for EHC 60. Direct buyers confirmed that the posting for ExxonMobil’s API Group II+ EHC 60 (190 vis) rose 25 cents/gallon to $3.49 effective Dec. 7.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.