According to sources, a number of suppliers are shipping product in both trucks and tank cars to customers upriver since barges are not able to move. This is absorbing additional material and equipment, a market source explained.

Other sellers said they had not been affected by the floods and their shipments by rail had only suffered minor delays.

Base oil prices started the year weighed down by falling crude oil values, but the fresh requirements, together with renewed tensions in the Middle East – which could bring about a jump in crude numbers – might stall the downward trend.

A majority of paraffinic and naphthenic base oil producers revised prices down during December, and participants had expected conditions to remain fairly lackluster until the start of the spring buying season in February.

Demand for most cuts declined in the last two months of 2015 as had been expected ahead of the year-end holidays, but producers had felt additional pressure from mounting inventories and plummeting crude prices. These conditions prompted base oil price decreases ranging from 10 to 20 cents per gallon during the month of December.

Base oil buyers had been reluctant to purchase large volumes on concerns that prices would see further declines, but were expected to return to the market to replenish stocks in the next few weeks.

A producer said it was too early to tell what January would be like, as it is always a difficult month, particularly as far as being able to predict spot pricing and demand. I don’t think this year will be an exception with the energy sector so unpredictable, the supplier noted.

There were also expectations that demand from Mexico would improve in January, as December was quiet and buyers had secured fewer volumes than in previous years, sources commented.

Market participants also hoped that a number of turnarounds planned during the first quarter would help balance supply and demand.

Motiva has started a turnaround on one of the three trains at its Port Arthur, Texas, Group II plant, according to sources. The turnaround started last week, but is not anticipated to have a significant impact on product availability as the other trains are running well. Motiva has a total capacity of 40,300 barrels per day of Group II base oils, according to LubesnGreases Global Guide to Base Oil Refining.

It was also heard that Calumet will be conducting a partial turnaround at its Shreveport, La., plant for two to three weeks in the first quarter of 2016, but this could not be confirmed. The plant has capacity to produce 4,800 b/d of Group I and 7,000 b/d of Group II oils.

On the naphthenic front, Ergon reported that the Mississippi River flooding has not had a major impact on operations at its Vicksburg, Miss., plant. The river is rising at a very fast rate, and this has caused the producer to lose rail access at the refinery for a brief period. Ergon has implemented a contingency plan which proved to be very effective during previous floods, and the producer expects no impact to its customer base.

Ergon will also be shutting down its 22,000 b/d naphthenic base oils plant for a three-week maintenance program in the first part of the first quarter of this year. The producer has prepared inventories to cover requirements during the outage and does not expect any supply disruptions.

In addition to routine maintenance, the outage will enable Ergon to make the final modifications to the crude distillation unit, with a new hydrotreater providing Ergon the capability to manufacture more highly refined products.

The producer will also begin production of a new Group I bright stock. The plant’s capacity will be 3,000 barrels per day and product will be available beginning in the third quarter of 2016.

San Joaquin Refining plans to slow crude oil runs and complete a turnaround at its Bakersfield, Calif., refinery in the first quarter as well. San Joaquin’s base oil plant can produce 8,100 b/d of pale oils.

In other production news, the ceasing of Group I output at ExxonMobil’s Beaumont, Texas, plant, is expected to occur later this year as scheduled.

Base oil production at the facility will stop during the second quarter, and customers who had been sourcing oils from this plant will receive product supplied by the company’s facilities in Baytown, Texas, and Baton Rouge, La., a source familiar with the company’s operations confirmed this week.

Baton Rouge can produce 16,000 b/d of Group I base oils, and Baytown 9,800 b/d. In addition, Imperial Oil – which is 69.6 percent owned by ExxonMobil – has a 2,400 b/d Group I plant in Strathcona, Canada.

The Beaumont plant is the third-largest source of Group I base oil in North America with a 10,000 b/d of Group I capacity, but the producer decided to cease production in response to a global trend toward more highly refined stocks (for more information, see ExMo to Unplug Group I Beaumont Plant in the Aug. 19, 2015 issue of Lube Report)

Upstream, West Texas Intermediate (WTI) futures slipped on Tuesday after registering early gains, as ongoing concerns about a persistent global glut and weak economic data from China outweighed worries about tensions in the Middle East.

WTI settled on the CME/Nymex at $35.97 per barrel on Jan. 5, down $1.90/bbl from its Dec. 29 settlement of $37.87.

Light Louisiana Sweet wholesale spot prices closed at $38.39 on Jan. 4, compared with $37.59/bbl on Dec. 28, according to data from the Energy Information Administration.

Brent was trading at $36.42/bbl on the CME on Jan. 5, down $1.37/bbl from $37.79 a week earlier.

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