U.S. Base Oil Price Report


Amid discussions of a supply crunch in the U.S. base oil market and delays at the new Chevron plant in Pascagoula, Miss., ExxonMobil raised posted prices this week.

According to market sources, the producer intends to lift API Group I postings by 10 to 15 cents per gallon, with the 100 and 150 neutral cuts being increased by 10 cents/gal, the 330N and 600N cuts by 12 cents/gal and bright stock by 15 cents/gal. All of the producers Group II+ postings will be moved up by 8 cents/gal. The increases will become effective on May 23, sources added.

Although a price increase initiative would not come as a complete surprise at this point, given the tight supply situation and high production costs, it was somewhat puzzling that ExxonMobil would be seeking a price hike, when the producer was recently heard to be granting steep discounts on Group II+ spot transactions.

The snug product availability observed in the domestic base stock market is the result of past, current and upcoming turnarounds, coupled with steady demand.

Despite the fact that Calumets Group I and II Shreveport, La., facility will be restarted on May 21, following a routine turnaround, the producer said that it had a lot of catching up to do because of depleted inventories on all viscosity grades. The start-up was delayed from an original date of May 14. The producer added that it would resume shipments shortly after the restart as it has numerous back orders to fulfill, and did not expect to be fully caught up until late June. Calumets unit has a capacity to produce 4,800 barrels per day of Group I base oil and 7,000 b/d of Group II cuts.

But Calumet is not the only producer struggling to meet contractual commitments. Flint Hills Resources and Phillips 66 will be undertaking an extended turnaround at their shared Excel Paralubes refinery in Westlake, La., and were heard to be monitoring the fulfillment of customer orders very carefully to ensure supply while the unit is off-line. The Excel Paralubes plant has a production capacity of 22,200 b/d of Group II base oils.

News of an oil spill at Motivas base oil tank farm at the Port Arthur, Texas, refinery also hit the market this week. Almost 3,000 barrels of base oil were spilled from a process rundown line to a storage tank on May 14, a company source said, but the majority of the oil was contained in a cement-lined storm drain. The oil spill did not affect the companys base oil production as it was diverted to a different tank farm, the source added. Motivas base oil unit can produce 40,300 b/d of Group II cuts.

According to local news reports, booms were immediately deployed and vacuum trucks were used to clean up the spill, and the producer plans to take soil samples and submit reports to the Texas Commission on Environmental Quality as required, although there was no impact expected from the spill on the nearby community or the environment.

On the naphthenics front, business remains strong, prices are stable and inventories are at low levels, according to an industry source, with other suppliers reporting similar conditions.

Rerefiners are also dealing with a tightening supply scenario. Safety-Kleen and Heritage Crystal were heard to be unable to offer extra volumes. This year, I’ve seen a shorter, more compact spring selling season, a source at Avista/Universal Environmental Services (UES) stated, adding that supply is very tight against heavy demand. The company started production at its recently built Peachtree City, Ga., facility in August 2013 and has been running at full rates for the last six months. The unit can produce 1,300 b/d of Group I and II rerefined base oil.

Upstream, West Texas Intermediate crude futures were trading near a four-week high given expectations that crude supplies would decrease further at Cushing, Okla., the largest U.S. storage hub.

WTI settled on the CME/Nymex at $102.44 per barrel on May 20, up 74 cents from a settlement at $101.70/bbl on May 13.

Brent crude was trading around $109.69 per barrel on the CME, up 45 cents from $109.24/bbl a week ago.

Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.

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