U.S. Base Oil Exports Swell


U.S. refiners continue to participate vigorously in the global base oils trade: From January to June, they sent 13.5 million barrels of the stuff out into the world – a volume equal to 42 percent of the countrys entire base oil output during that period.

In volume terms, thats about 10 percent more than the 12.2 million barrels shipped abroad in the prior six months (July to December 2014) or the 12.3 million barrels sent in the first half of last year, according to data released Aug. 31 by the U.S. Energy Information Administration.

The top five country destinations for U.S. base oil exports in the first half of 2015 were Mexico, which took 2 million barrels; Brazil, with 1.4 million barrels; Canada (1.3 million); Belgium (1.2 million) and India (780,000 barrels).

By region, Latin America – including Mexico, Brazil and the Caribbean – swallowed 50 percent of the U.S. exports. Europe took 16 percent of the exported barrels, closely followed by Asia-Pacific with another 15 percent.

Trade to Mexico seems to go up and down, depending on how well Pemex is running its plant in Salamanca, Mexico, commented an oil company executive in Houston, who spoke on condition of anonymity. And South America is more active right now than Europe. Sales are non-existent in Europe. Theres no demand there. But shipments are going to Brazil and Ecuador.

A lot of base oil washes into the country, too, and that tide continues to rise. More than 6.6 million barrels landed on U.S. shores in the first half, compared to 5.4 million barrels in first-half 2014. Most of this inflow is Group III base oils, which are not made in the United States but are in strong demand for blending SAE 0W-XX multigrade engine oils and automatic transmission fluids.

The largest source of base oil imports was South Korea, with 35 percent of the total (2.3 million barrels). That was a 49 percent gain over last years first half, when imports from South Korea dipped to 1.6 million barrels.

The second-largest source of U.S. base oil imports is Canada, which pumped nearly 2 million barrels over the border in this years first half, a 15 percent gain versus the same period in 2014.

Two newer sources, Bahrain and Qatar, together accounted for 25 percent of the imports in the first half, with Qatars volume amounting to 1.2 million barrels and Bahrains being 486,000 barrels. Bahrain is the home of Bapco Lube Oil, a joint venture between Finlands Neste and Bahrains national oil company, which has 8,200 b/d of Group III capacity.

Qatars base oil is entirely sourced from Pearl, a gas-to-liquid facility making Group II and III base oils that are unavailable as yet to anyone but Shell Lubricants. Shell is a co-owner of the joint venture plant, along with Qatars national oil company; Pearls capacity totals 28,000 b/d.

The U.S. is sucking up Group III, said Steve Ames, principal at SBA Consulting LLC in Pepper Pike, Ohio. Meanwhile, everyone is having trouble getting rid of light neutrals, and their tanks are pretty much chock-a-block full. Were seeing big exports of light neutrals to places like India, via traders. These parcels are typically in the 15,000 to 18,000 ton range, he added.

Despite the overall gain in export sales, some report that offshore sales have turned wobbly in the years second half, with buyers nervous about committing to large parcels that may fall in value before they arrive.

In 2014, we were booming with exports, reported Ryan Eberly, sales and marketing director of San Joaquin Refining, which operates a naphthenic base oil refinery in Bakersfield, Calif. We were shipping parcels on vessels with several thousand metric tons each, or 30 railcars.

Now, its pretty much just small volumes, just flexitanks and ISO container loads, Eberly continued. Nobody wants to take a position because of the price softness. Theyre afraid the price will drop again before the cargo even arrives.

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