Chevron, the only major U.S. West Coast refiner, is not typically the leader of the pack when it comes to price moves, but due to rising operational costs and strong demand amid low inventories, the company said it will up its three API Group II postings on Friday, April 1. Neutral 100R and 220R will move higher by 35 cents/gal, and 600R will jump up 40 cents/gal.

Supply issues prevail, causing concern among domestic buyers. In recent weeks, the market has learned of operational woes at several locations.

Following production problems with the catalytic dewaxing unit at its Mississauga, Ontario, plant, Petro-Canada placed its customers on a temporary allocation effective Monday, March 28. The company has scheduled a turnaround for early April for repair of this unit and continues to explore options to help cover customer orders. The Mississauga plant has capacity to produce 13,600 barrels per day of Group II and 2,000 b/d of Group III base oils.

Due to its exceptionally tight stock position, Motiva continues with an 80 percent sales allocation on Star 6, and 110 percent for Star 5+. Early this year Motiva experienced production difficulties at its Port Arthur, Texas refinery. These issues were rectified in February, sources noted. The producer is also in preparatory stages of a planned turnaround, which is to commence in late May on one of its three units. Motiva has capacity to produce 40,300 b/d of Group II in Port Arthur.

Adding to this mix, late last week Calumet experienced an operational disruption in the propane deasphalting unit at its 11,800 b/d paraffinic facility in Shreveport, La. This glitch has interrupted output of bright stock. The unit is going to be in repair mode until repairs are completed and normal rates resume, which is expected by mid-May. Current inventories of bright stock will not allow all orders to be covered until the repair work has been completed, the company advised.

American Refining Group reports that it has put medium neutrals on sales control. It entered into a planned turnaround at its Bradford, Pa., 2,400 b/d base oil plant last week. The downtime is expected to last several weeks, with full production to resume in mid-April.

Other producers acknowledge that demand is very healthy, and they are keeping a close watch on sales. Internal inventories are viewed as dangerously low at most production sites, and any unexpected production hiccup or uptake in orders would push the very fine balance in the wrong direction, sources say, adding there is no wiggle room. Consumers are anxiously seeking additional volumes via all avenues, but with limited success.

Looking upstream, vacuum gas oil values continue to be a bone of contention for base oils producers and their cost of operation. VGO premiums have been running at circa $10 to $24/bbl over WTI crude prices for months. There has been only limited relief from these differentials, say a few producers, with low sulfur VGO still assessed at about plus $19 to $21/bbl to crude.

And crude oil values over $100/bbl are considered highly likely, according to energy analysts. The spreading geopolitical upheaval seen in North Africa and the Middle East over the past few months has been driving oil prices up. Libya, where about 2 percent of the worlds crude oil is produced, has largely stopped production. Exports are expected to be halted for at least several months.

At the close of the Tuesday, March 29, NYMEX session, front-month light sweet crude futures ended the day at $104.79 per barrel, a modest gain of 79 cents compared to the March 22 close at $104/bbl.

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