U.S. Base Oil Price Report


Base oil market participants continued to follow the repercussions of Hurricane Harvey with concern, as a large base oil producer has declared force majeure on base oil supply, and also watched Hurricane Irma as it pounded on islands in the Caribbean and the southeastern United States.

Sources indicated that Motiva had declared force majeure on all of its API Group II base oil grades produced at the Port Arthur, Texas, facility, which had been flooded after Harvey dumped massive amounts of rain on the Gulf Coast (for more details, see Motiva Declares Force Majeure in this issue of Lube Report).

Motiva operates the largest base oil facility in the U.S, with capacity estimated at 40,300 barrels per day. The company was heard to have communicated that orders would be on allocation and additional details would be provided during the week.

Several other refineries and base oil plants in Texas were also forced to shut down due to flooding.

Meanwhile, Irma left a trail of devastation in several states after it touched down in Florida on Sept. 10, causing storm surges, flooding coastal communities and leaving more than 6.2 million homes in Florida without electric power.

The storm also caused severe flooding in parts of Georgia, South Carolina, North Carolina and Alabama, and also uprooted trees, destroyed buildings and left millions without electricity and water.

While there are few base oil production plants in the areas affected by Irma, there are a number of lubricant blending plants and terminals located in the region, including several in the Tampa Bay area, and others near ports such as Savannah.

A number of ports in the region closed ahead of the storm and vessels were not allowed in or out. Media reports said that the Georgia Ports Authority was working to have the port of Savannah open by the end of the day Tuesday or early Wednesday this week.

The Refineria Isla base oil plant located on the Caribbean island of Curacao was heard to have been unharmed by the hurricane as it was south of the storms path. Operations at the 5,000 barrels per day Group I and 3,700 b/d naphthenic base oils plant were running normally, a company source said. The base oil produced at the plant is marketed by Nynas.

Communications and transportation in the Irma-impacted districts were slowly being restored, but many of the damaged properties and infrastructure will take years to rebuild.

An arduous recovery process was also taking place in Texas and other locations hit by Hurricane Harvey less than two weeks ago. Railroad and truck transportation were gradually being restored, and while product deliveries could still experience delays, cargoes were heard to be starting to be loaded and shipped out.

Lubricant producers said that their operations would be affected both by a potential base oil shortage and a delay in shipments, but were encouraged to see that transportation issues were being resolved.

Sources indicated that rail cars were able to access some of the refineries, and most of the west-bound rail shipments were moving out of Houston without difficulties.

The movement of base oils to Mexico was improving, too. The rail track just north of Brownsville was back in operation last Tuesday and did not cause any further problems, an industry player commented.

Meanwhile, storage tanks at a number of refineries in Texas have been damaged or collapsed under the weight of the rain water.

More than two dozen storage tanks holding crude oil, gasoline and other products ruptured or otherwise failed when Harvey slammed into the Texas coast, according to an Associated Press report.

Two of the failures occurred in gasoline storage tanks at Shell Oils Deer Park refinery and at ExxonMobils Baytown refinery, the report said.

ExxonMobils Baytown refinery was understood to be in the restart process, but it could not be ascertained whether the Group I/II base oil plant at that location would also be resuming production soon.

Valeros Three Rivers refinery in Texas – which houses a naphthenic base oil plant – was operating at reduced rates, while LyondellBasells naphthenic plant in Houston was expected to restart operations over the past weekend if crude supply could be restored. Product was being shipped to truck customers out of the plant from existing inventory, a source familiar with the companys operations said.

Calumets Shreveport, Louisiana, Group I/II/III and naphthenic base oil plant continued to run at full rates, but the companys Princeton, Louisiana, naphthenic unit was still running below capacity due to low crude availability.

The Shreveport plant is expected to undergo a two-week turnaround in November.

Phillips 66 had shut down its Beaumont terminal in Texas during the hurricane, but its Lake Charles, Louisiana, refinery and terminals continued to operate normally. Phillips 66, together with Flint Hills Resources, markets base oils manufactured at the Excel Paralubes Group II plant in Westlake/Lake Charles, Louisiana.

Meanwhile, in terms of base oil pricing, discussions were muted as participants were still trying to assess the extent that supply had been crimped by output outages and Motivas force majeure declaration.

Several producers, including Motiva, Flint Hills Resources, Phillips 66, and ExxonMobil had communicated posted price decreases between 3 cents per gallon and 22 cents/gal in late August.

Chevron had notified customers of a price decrease, effective Aug. 30, of 10 cents per gallon for its 100R and 220R grades and 15 cents/gal for its 600R.

The decrease had followed an increase of 10 cents/gal on the producers 100 and 220-vis base oils implemented on July 26, which buyers said was mostly offset by the subsequent 10-cent price reduction announced a month later.

With so much production lost due to the hurricane, and the market expected to become tight, market players speculated that the decreases would be rescinded, but this could not be confirmed.

Upstream, crude futures finished higher Tuesday, extending gains into a second consecutive session as the latest OPEC report showed oil production fell last month. The upside was capped by higher-than-expected U.S. inventories on the back of lower demand from refineries that shut down in the wake of Hurricane Harvey.

On Tuesday, Sep. 12, West Texas Intermediate futures settled on the CME/Nymex at $48.23 per barrel, down 43 cents/bbl from $48.66 per barrel on Sep. 5.

Light Louisiana Sweet wholesale spot prices closed at $52.56 per barrel on Sep. 12, according to data from the U.S. Energy Information Administration.

Brent was trading at $54.27/bbl on the CME on Sep. 12, up 89 cents/bbl from $53.38/bbl on Sep. 5.

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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