U.S. Base Oil Price Report

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As the dust settles following the latest spate of price decreases for U.S. base oils, market players say several factors are helping to make supply snug.

The most recent round of price cuts were implemented between Sept. 9 and Sept. 22. Within the API Group I category, producers lowered postings for light- and medium-viscosity grades by 10 cents per gallon or 15 cents per gallon, depending on the cut.

Cuts in other categories were likewise limited mostly to light and medium oils and ranged from 5 to 15 cents/gal for Group II stocks, 10-20 cents/gal for Group II+ and 20 cents for Group III. Limited supply was cited as the reason that prices for heavy grades did not fall, though HollyFrontier did lower the price of its bright stock 15 cents/gal.

As many participants have pointed out over the last few months, the snug situation is partly the result of several refineries processing higher volumes of shale oil, which yields fewer molecules of the heavy-vis base oils.

Additionally, talk continues to circulate that Chevrons base oil plant in Pascagoula, Mississippi, is experiencing production problems. The plant was heard to have undergone a turnaround in August, but sources said there were still some unresolved technical issues, driving the producer to secure product from other U.S. suppliers to meet contractual commitments. Chevron did not disclose the current production status of the Pascagoula plant.

Calumet’s planned turnaround at its Shreveport, La., base oil facilities was also said to have contributed to the markets tightness. Despite the fact that the producer has built inventories beforehand to continue supplying customers, sources said the turnaround has restricted the amount of extra barrels available in the market.

Calumet’s turnaround is proceeding as scheduled, a company source said. The catalytic dewaxing unit, which manufactures light-viscosity oils, was taken off-line for two weeks in mid-September, while the solvent dewaxing or methyl ethyl ketone unit, responsible for the output of the heavy base oils, will be shut down for two weeks in October. The Shreveport facilities have capacity to produce 4,800 barrels per day of Group I base oil and 7,000 b/d of Group II cuts.

Despite the recent decreases on crude oil and posted base oil prices, buyers pointed out that no finished lubricants price reductions had surfaced. While there is usually a time lag between one and the other, players were disappointed that no finished lube manufacturers had made a move yet.

Upstream, West Texas Intermediate futures strengthened on Tuesday on expectations that U.S. oil production would slow, although supply from the rest of the world is likely to continue at the same rate, placing a cap on oil values.

WTI closed on the CME/Nymex at $45.23 per barrel on Sep. 29, down 60 cents/bbl from its Sep. 22 settlement of $45.83.

Brent was trading around $47.71/bbl on the CME on Sep. 29, down $1.38/bbl from $49.08/bbl a week earlier.

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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