U.S. Base Oil Price Report

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While crude oil futures remain sensitive to changing economic and political forces, prices seem to have stabilized and even strengthened, allowing base oil producers to take a break from repeated downward price adjustments.

Base oil demand is still described as generally sluggish, but a few suppliers said that orders had seen a slight revival and that there had been improved activity this week, likely caused by concerns over peaks in crude oil pricing. The spike in crude in the past couple days has pushed buyers into coming out of hibernation, a supplier commented.

West Texas Intermediate crude oil futures rallied for a fourth day on Feb. 3, teetering between $49 and $54 per barrel, on speculation that reduced investments due to recent crude oil price drops would lead to curtailed oil production. Prices had recently fallen to $44.45/bbl on Jan. 28, their lowest level since March 2009.

Base oil producers also said that some consumers may be operating on low inventories and feel the need to replenish stocks before activity improves in earnest, as prices could potentially move up.

In the meantime, base oil prices remained steady, and there were no reports of fluctuations. The downward trend in spot pricing seems to have been staved off as both buyers and sellers awaited a clearer picture on the crude oil front, although downward pressure persisted because of ample availability.

In production, it was heard that Motiva is performing maintenance work at its Port Arthur, Texas, refinery.

According to the local press, output at the Port Arthur refinery has been reduced since Jan. 12 because of maintenance work at the gasoline-producing fluid catalytic cracking unit (FCCU), a reformer, an alkylation unit, and a sulfur recovery unit. There is also some work being done at a coking unit.

However, the current maintenance is not affecting base oil production, market sources said.

Motiva is planning to have a turnaround at one of its base oil production trains at Port Arthur from mid-May until mid-June, but it will likely not affect shipments to customers as the two other trains will continue to operate, sources added. Motiva can produce 40,300 barrels per day of API Group II oils at its Port Arthur unit.

There has also been attention focused on the ongoing steelworkers strike at nine U.S. refineries, which started on Feb. 1. The United Steelworkers, a union representing employees at more than 200 refineries, terminals, pipelines and chemical plants, stopped work at nine sites after negotiations for renewal of a labor contract broke down, according to a Bloomberg report.

Analysts expected the impact on operations to be minimal as most of the refineries are being run by technicians from a control room, and not by field workers such as welders and pipefitters.

Tesoro, Marathon, Shell, and LyondellBasell are some of the refinery operators being affected by the strike.

A source familiar with LyondellBasells operations confirmed that the workers strike had started at the Houston, Texas, refinery on Feb. 1, adding that management was running the facility at this time. Base oil shipments are being loaded on barges and tank cars out of the plant, but truck shipments have been interrupted. The plant mainly produces naphthenic base oils (3,600 b/d) and some paraffinic oils (1,000 b/d).

There were no other reports of base oil shipments being impacted by the strike this week.

As far as crude oil prices are concerned, as mentioned above, WTI futures settled on the CME/Nymex at $53.05 per barrel on Feb. 3, up $6.82 per barrel from a settlement at $46.23 per barrel on Jan. 27.

Brent crude was trading around $57.91 per barrel on the CME on Feb. 3, up $9.75 per barrel from $48.16 per barrel 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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