The U.S. base oil market appears to be in a holding pattern, with little change noted in buying or supply programs in the past week. Customers say they are receiving scheduled contractual volumes without a hitch, and suppliers concur that orders are on target. Posted prices are once again stable, and spot offers are described as firm.
Industry participants agree that there are limited spot volumes of certain grades, particularly API Group II mid and heavy vis cuts. This is not to say that other Group II base oils are in better supply, but its debatable depending on the supplier. Meanwhile, whether due to turnarounds underway or about to commence, supplies are helping to keep overall Group II balanced-to-snug. Players also stress Group III availability will remain largely balanced-to-tight, although most customers are receiving contractual amounts.
A few buyers admit there are no real bargains, as most producers are standing firm on offers and unwilling to negotiate lower prices for most base stocks. However, one or two deals have popped up, but the discount amount offered is not impressive, buyers noted.
Adding to the growing list of planned downtimes for this quarter and next, the SK facility in Ulsan, Korea, is scheduled for a turnaround on two of its lube units in March. Each unit will be offline for about five weeks. An insider said that despite the planned outage in Korea, all U.S. contractual obligations will be covered as inventories are being prepared in advance to ensure all customer requirements.
According to industry sources, Petro-Canada is expecting to take its Group II base oils plant down for maintenance in the spring. Details of the downtime were not yet available.
These two turnarounds add to the others that were reported in last weeks Lube Report. To recap, a planned downtime will soon begin at the Group II Excel Para lubes site in Westlake, La. in mid-February. Calumet will take its Group I/II Shreveport, La., plant down for a 10-day maintenance program on its hydrotreater on Feb. 10. Sources said the Motiva shutdown, which began in early-mid January, has not been concluded but they understand that the plant will resume operations mid-month.
The Calumet Princeton, La., naphthenic production facility also is slated for a two-phase shutdown. The crude unit is expected to be taken offline in early March, followed by hydrotreater maintenance beginning on April 7. Cross Oil also is preparing to have a scheduled maintenance at its Smackover, Ark., refinery at some point during March.
Feedstock costs have recently increased with vacuum gasoil values stretching to over $27 per barrel atop WTI for low sulfur VGO and high sulfur appraised at about $3 to $4/bbl less. These differentials are up several dollars the past few weeks. Foreign crudes have also strengthened with Brent up about $6/bbl from last week and domestic crude types such as Light Louisiana Sweet (LLS) also rising.
At the close of the Tuesday, Feb. 7, CME/Nymex session, front month light sweet crude oil futures ended the day at $98.41/bbl, shedding a mere 7 cents/bbl from last weeks settlement at $98.48.
Brent crude was trading at $116.09/bbl at the end of the day yesterday, up $5.22/bbl from its week-ago level at $110.87. LLS crude was trading at a premium of about $17.50/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.