U.S. base oil market conditions appear to be in a holding pattern, with little change in buyers consumption levels or supply issues. Overall availability remains tight against fairly strong customer orders.
Although market activity is somewhat quiet this week, due largely to extremely cold weather across much of the country, demand is deemed more than satisfactory for early-to-mid January. Suppliers say that sales are also steadily growing for the coming months.
But they warn that inventories are being challenged and if demand spikes beyond expectations it would push their stock positions to uncomfortably low levels. Already there are concerns that not all customer requirements can be satisfied when the spring fling kicks in.
It is understood that all grades of API Group II, II+, III and III+ are already very tight alongside strong buying interest for the first half of 2011. Availability for Group I base stocks is also snug, with bright stock mostly in a sold-out position. (A tight bright stock situation has prevailed since late summer and prices reflect this at posting-plus for spot quotes.)
In the naphthenic arena, a number of segments continue to grow, including metalworking and rubber-related uses, and are weighing heavily on supply availability going forward.
Highlighting the naphthenic supply situation is that several downtimes are scheduled for January and February, along with one plant struggling due to problems that erupted in late November.
To recap: In late November, Lyondells Houston Refining Co., with 1,000 barrels per day of API Group II and 3,600 b/d of naphthenic capacity, experienced an operational interruption. This resulted in reduced production of the companys pale oils. 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. No update can be ascertained at present regarding a start date at this facility.
Starting Jan. 22, San Joaquin Refining in Bakersfield, Calif., will commence a scheduled two-week turnaround 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 production of light-vis naphthenic products.
On Feb. 5, Cross Oil is scheduled for a three-week turnaround to get under way at its 5,000 b/d naphthenic facility in Smackover, Ark. The company continues to build its stocks in advance of this maintenance.
Looking upstream, crude oil prices surged on Tuesday following various news stories, including the recommendations of a presidential panel investigating the U.S. Gulf oil spill, and the temporary shutdown of the Alaska crude pipeline for repairs.
Futures also got a big boost from another wintry blast heading into the Northeast and cold weather blanketing much of the rest of the country. As well, Japans promise to buy bonds in efforts to help the financial woes involving Europes bailout fund drove crude futures prices higher.
At the close of the Tuesday, Jan. 11, NYMEX session, light sweet crude futures ended the day at $91.11 per barrel, a gain of $1.73/bbl compared to the week earlier settlement at $89.38/bbl.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.