U.S. Base Oil Price Report


Chevron announced that it would increase its API Group II posted prices this week. The announcement took a few base oil participants by surprise, as the market had been fairly quiet.

Chevron will raise its Group II 100R, 220R and 600R grades 20 cents per gallon, effective Aug. 24, to reflect the current supply/demand balance and market conditions, a company source said.

Higher crude oil values in recent weeks were thought to be part of the impetus behind the hike. It was not yet clear whether other producers will follow Chevrons initiative.

At the same time, sources noted that the typical weakening in requirement levels at the end of the summer was placing some downward pressure on spot indications.

A decline in buying appetite from Europe for United States exports was noted during the month, but there was renewed interest from Mexico, South America and Africa this week, which would likely offset some of the downward pressure on spot prices.

A number of suppliers also reported fairly tight positions for certain grades – in particular the mid- and heavy-viscosity cuts.

Crude oil futures plunged to a two-week low, but then recovered on Tuesday, moving to levels above $48 per barrel. The initial fall was attributed to news that Iraq – OPECs second-largest producer – would increase output by 5 percent in coming months. However, Iraq later indicated willingness to discuss an output freeze with other OPEC members at an upcoming international meeting next month.

WTI futures settled on the CME/Nymex at $48.10 per barrel on Aug. 23, up $1.52 per bbl from the Aug. 16 settlement of $46.58 per bbl.

Light Louisiana Sweet wholesale spot prices closed at $48.33 per bbl on Aug. 22, up from $47.42 per bbl on Aug. 15, according to data from the U.S. Energy Information Administration.

Brent was trading at $49.96 per bbl on the CME on Aug. 23, up 73 cents per bbl from $49.23 per bbl on Aug. 16.

Aside from watching developments on the crude oil front, base oil participants were also keeping a concerned eye on possible supply disruptions due to severe weather conditions in Louisiana, where several oil refineries are located.

ExxonMobil was forced to shut an 110,000 barrels per day crude distillation unit at its 502,500 b/d Baton Rouge, Louisiana, refinery on Aug. 16 due to flooding, according to media reports.

The CDU was shut down to reduce liquefied petroleum gas production because a nearby LPG storage facility was flooded. The refiner may have to cut crude processing further if operations at the storage facility are not restored in the next few days.

Additionally, ExxonMobil had reduced production by 50 percent at a second CDU in the same location for planned maintenance prior to the floods. The unit can process 210,000 b/d of crude oil.

ExxonMobil operates a 16,000 b/d API Group I base oil plant in Baton Rouge, but it could not be ascertained whether the flooding had affected operations there, as the producer does not comment on the status of specific units at its facilities.

Calumet also operates two base oil plants in Louisiana, but both the Princeton unit – which can produce 6,900 b/d of naphthenic base oil – and the 11,800 b/d Group I Shreveport facility were running at normal rates because they are not located in the area affected by the flood, a company source said.

Incidentally, a small fire that broke out on a high-pressure hydrogen line at the Princeton refinery on Aug. 20 was quickly contained, causing no injuries or major damage, according to sources.

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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