During the past week, not only did U.S. base oil postings remain unchanged, the market learned that the Imperial Oil facility in Sarnia, Ontario, plans to cease production of base oils, process oil and wax by early 2011.
This news came as a fairly big surprise to some players, while other market watchers said they expected the closure sooner or later. One source speculated that the base oil industry should prepare itself for yet another API Group I plant closure to be announced in coming months, but would not expound on details. See todays cover story for more information on Sarnia.
Adding further to the mix of base oil-related events this past week, there was an explosion at Calumets Shreveport, La., paraffinic facility last Friday. According to key sources, before the incident the company had sufficient stock levels to satisfy most light-end vis requirements. However, due to an already tight inventory position for heavy neutrals and bright stock, customer orders for these grades will be stalled for at least a week. The company does not anticipate making rail car shipments of heavy neutrals and bright stock while repairs at the site are underway, but deliveries via truck for all base stocks are expected to continue without delay or interruption.
Meanwhile, the stock market managed to make a slight comeback after shedding gains during the past five to seven days of trade. The Dow Jones is back to just over 10,000 points and consumer confidence has been fortified once again. Last week, news stories out of Europe led to a nervous marketplace and led stocks to freefall.
Geopolitical tension and ongoing financial risks stemming from Greece, Portugal and Spain are weighing heavy on investors, but more positive news emerged on Tuesday. It now appears that the European governments have agreed in principle to help deeply indebted Greece, a senior German coalition source said on Tuesday. This action is the first rescue of a euro zone member in the currency’s 11-year history.
The crude oil market had also taken a downturn during the past week, but it too has shown some recovery, and prices headed higher on Tuesday to around the $74 per barrel level. Although still well below the $83/bbl mark it reached earlier in January, some analysts believe conditions are ripe for crude oil values to move toward the $90 to $92/bbl level in the second half of this year.
According to a Merrill Lynch strategist report, downside risks to crude oil prices have diminished with various economic data points suggesting that the worst is over for oil demand.
For now, crude values remain sluggish despite demand resulting from colder than normal weather blanketing much of the United States, especially the northeast.
At the close of the Tuesday, Feb. 9, NYMEX session, front month light sweet crude oil futures ended the day at $73.75 per barrel, a loss of $3.48 from the week earlier settlement at $77.23/bbl.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.