The U.S. base oils market enjoyed a quiet week, with summer vacations in full gear, many players away from the workplace, and producers working hard to rebuild inventories.
Sources said that the current slowdown in demand is giving both paraffinic and naphthenic producers time to try and rebuild their much-depleted stock levels. They reiterated that this does not mean that availability is flush, as this is not the case. Several suppliers noted that they are finally beginning to catch up on back orders lagging from the May-June time frame.
On the paraffinic side, the market continues to cope with the Motiva downtime which has placed a lot strain on the overall availability of API Group II/II+ grades. Motiva took one of its three trains at the 40,300 barrel per day Port Arthur, Texas, site down in late May for a planned five week turnaround. However, earlier this month the large producer told its customers that a delay in the start-up was encountered. Sources believe that the plant should be up and running in the coming week or so.
Also, both Motiva and Chevron maintain their sales allocation programs. Other sales control plans are being enforced across the board by other suppliers, as well. However, in some cases there has been a slight let-up on the stringency of how much volume can now be shipped to contract customers, sources said.
Price ideas are generally holding, and sellers claim that there has been no discounting, despite some buyers efforts. Shifting current market prices lower is unlikely, sellers insist. In many cases, producers are standing by their terminations of TVAs (temporary voluntary allowances) some months ago.
Nynas is attempting to build its stock position ahead of a scheduled turnaround at the 2,400 b/d Three Rivers, Texas, naphthenic facility. (Nynas markets the pale oils produced there by refinery owner Valero.) The downtime is to commence in October and is expected to last for about three weeks. A company source acknowledges that demand has been exceptionally healthy for months against low inventories. The source added that during this offline period, contract customers can be assured their orders will be covered.
In addition to the Texas downtime, Nynas will also enter a large turnaround at its 7,800 b/d naphthenic plant in Nynashamn, Sweden, in September. The facility is scheduled to resume operations in October, and the company expects to realize about a 10 percent increase in capacity by early 2012.
At the close of the Tuesday, July 12, NYMEX session, light sweet crude futures ended at $97.43 per barrel, a marginal gain of 54 cents compared to the July 5 settlement at $96.89/bbl.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.