The massive weather system which roared along the mid-Atlantic coast and into the Northeast over the weekend prompted preparatory measures at U.S. base oil plants. Fortunately, any operational woes or destruction is thought to be minimal at this point. Power outages and flooding were expected to be a major deterrent in the epic clean-up now underway.
Insiders said Paulsboro Refining in Paulsboro, N.J., continued to operate during Hurricane Irene, but at slightly reduced rates. Shipments from Paulsboro were halted during the height of the storm, but deliveries returned to normal shortly after, and the refinery was again running atnormal operatinglevels.
No reports of serious storm damage at base oil terminals and storages facilities have reached Lube Report.
Otherwise, overall demand for base oils continued at a decent pace throughout the U.S. despite the usual slow period ahead of the Labor Day weekend.
Supplier sources said that API Group II grades remain tight, and both Motiva and Chevron are still enforcing sales allocations on a number of grades. Demand has been robust for months for most cuts within all categories, but is exceptionally strong for Group II and III/III+, sources said.
Premium Group III grades are still tightly balanced, according to North American suppliers, and contract customers are receiving prescheduled quantities. Group III suppliers are not entertaining new business opportunities at present, however, sources said.
It emerged recently that some Group I light and heavy vis neutrals had become readily available, but that surplus was quickly absorbed by a number of grateful consumers seeking additional volumes. It is believed that pure-spot export activity remains negligible, as U.S. producers have not had large slugs of base oils to offer for cargo-sized parcels for months.
On the pricing front, there does appear to be added pressure from the buy side to see some relief. Presently, producers do not appear to be giving in to buyers wants, and there has been no move to lower postings from their current and rather long-standing positions. This subject could be debated for weeks to come, sources expect.
For now, operating costs remain stiff despite crude prices dipping into the $80s per barrel range the past several weeks. Vacuum gas oil prices remain at hefty premiums to benchmark WTI values. VGO is an essential feedstock for many large base oil producers.
At the close of the Tuesday, Aug. 30, NYMEX session, light sweet crude futures ended the day at $88.90 per barrel, up $3.46 compared to the Aug. 23 settlement at $85.44/bbl.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.