Late yesterday, the U.S. Army Corps of Engineers projected that the Mississippi River will crest at 57.5 feet in Vicksburg, Miss., on May 18, the highest level since 1937. The river was at 41.4 feet on Thursday. Vicksburg officials had warned the river was expected to hit the first flood stage of 43 feet this past Saturday and then would likely continue to rise.

Meanwhile, due to the flooding, river authority and management personnel were forced to temporarily halt ship and cargo activity, sources said.

In a press release issued by Ergon Refinings communications department, the company said at this revised crest its operations will be interrupted and, therefore, supply disruptions over the entire product line are anticipated. The Vicksburg refinery is by far the worlds largest source of naphthenic base oils.

The company said that information is constantly being updated and evaluated concerning the details of the flood crest. Therefore, the extent and timing of the product supply disruptions are not known and cannot be addressed at this time.

The company went on to say, Ergon’s staff is working diligently to minimize supply interruptions to our customers. We are developing alternate delivery options to minimize potential disruptions.

Customers as well other industry sources revealed that Motiva experienced a power outage on Sunday, which caused an immediate operational disruption at its Port Arthur, Texas, plant. Although the power was quickly restored, it was understood that the train that is scheduled for a planned turnaround starting late May (lasting about 5 weeks) was impacted. This is the train that produces Motivas Group II Star 6. Sources said that Motiva revised its already existing sales allocation from 80 percent to 50 percent for Star 6.

Holly Refining and Marketing experienced mechanical problems at its crude unit in Tulsa, Okla., last week and is being readied for repairs which were expected to take several days. The lube unit has been operating at full rates but will sustain a few days of downtime as the feedstock inventory levels are replenished. In a letter sent to its customers, Holly said that effective immediately all base oil orders will be accepted based on 50 percent of your average monthly purchases between January 2011 and March 2011. Secured Contract customers will be provided first priority and held within the agreed quantity limits.

Calumet is expecting to restart its PDA unit at its Shreveport, La., paraffinic location later this month. The propane deasphalter, which produces bright stock, had experienced a production disruption in late March. Calumet is also on target to commence a scheduled turnaround at its Princeton, La., naphthenic facility this coming weekend. The downtime is expected to last for two to three weeks.

Due to an exceptionally high product demand, naphthenic producer Cross Oil said it will control sales to its existing customer base. The Smackover, Ark., refiner is not accepting new business at this time.

Rumblings that Petro-Canada is still having supply issues at Mississauga, Ontario, persist but this could not be confirmed directly.

In summary, market sources from the buy side say that it is a seriously tight supply situation overall. They added that not all orders can be fulfilled and there are some delayed shipments.

Feedstock costs are still a concern for many base oil operators, although margins have improved somewhat following the most recent round of price hikes put through in April, a few suppliers concurred. Crude oil prices eased, shedding some $3 per barrel since Monday. Vacuum gasoil (VGO) and various crudes used at U.S. Gulf Coast refineries continue to run at a premium to benchmark West Texas Intermediate.

On a slightly different note, a few sources also pointed out that U.S. base oil posted prices remain undervalued when compared to those in Europe and Asia. All key global regions are tight in supply against strong demand.

At the close of the Tuesday, May 3, NYMEX session, light sweet crude futures ended the day at $111.05 per barrel, a loss of $1.16 compared to the settlement a week earlier at $112.21/bbl.

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