This week ushered in a strong storm brewing in the Gulf of Mexico and the first major storm of the season to threaten refineries along the Gulf Coast. On Tuesday, tropical storm Isaac was promoted to hurricane status with its sights set on New Orleans. However, experts warn that the storm track could easily change course and head either more eastward or westward.
In the wake of hurricane warnings, many refiners along the Gulf Coast began taking preparatory measures on Monday in hopes to lighten any possible damage that may be caused by high winds and heavy rains. The weather system is expected to make landfall today.
In one case, Ergon announced it is taking necessary precautions at its Vicksburg, Miss., facility. The company went on to say interruptions in supply are not expected, as all terminals are sufficiently stocked. Ergon will continue to provide updates on the situation as needed.
Similar messages were heard to have been sent by other prominent refiners located along the Texas and Louisiana coastlines to their direct buyers.
In addition to the possible disruptions that may occur from the impending hurricane, the market is monitoring the impact of the disastrous fire at Venezuelas Amuay refinery (see related story elsewhere in Lube Report). At least 48 people were killed before the fire was brought under control on Monday. Amuay has refining capacity of nearly 650,000 barrels per day. Sources expect that Venezuelan demand for fuel, gasoline and possibly base oils could spike in the coming weeks following the horrific incident.
With regard to the Chevron Richmond, Calif., situation, spokesperson Brent Tippen with Chevron Corporation Policy, Government and Public Affairs issued an update earlier this week:
We are writing to respond to articles that have been published recently speculating about possible lubricants supply shortages as the result of a fire that occurred at Chevrons Richmond refinery crude unit on August 6. At this point, we do not anticipate finished lubricants or base oil supply shortages as the result of this incident and we have notified our customers with this information. We are making transportation fuels and lubricants products at Richmond, but at a reduced rate. Chevron is working with all regulatory agencies and is fully committed to understanding the root cause of the Richmond incident. The investigation is still in its early stages and we will continue to share information when we are able to do so.
Meanwhile, U.S. base oil market activity remained fairly quiet as the long Labor Day weekend approached. Contractual obligations were being met without delay and sources said that posted prices held steady at unchanged levels. Conversely, spot offers were slightly firmer this week. Several buyer sources said that suppliers recently upped their offers from 15 to 30 cents per gallon on most grades. They added that the low-ball offers available in the market only a few weeks ago, were no longer achievable.
At the close of the Tuesday, Aug. 28, CME/Nymex session, front month light sweet crude oil futures ended the day at $96.33/barrel, down 35 cents/bbl from last weeks settlement at $96.68.
Brent Crude was trading at $112.37/bbl at the end of the day yesterday, lower by $2.33/bbl from its week-ago level of $114.70. LLS (Light Louisiana Sweet) crude was trading at a premium of about $14.50/bbl to WTI on Tuesday.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.