After the formation of ConocoPhillips, company officials said its too early to say what they will do withtheir share of base oils from the Excel Paralubes refinery.
Others in the industry, however, say its a safe bet that the merger of Conoco and Phillips will lead to further tie-up in the U.S. market.
After the merger was completed Aug. 30, ConocoPhillips general manager of lubricants, Tom Liberti, said the newly wed lube businesses were a good fit because Conoco was a base oil supplier (by way of its 50-50 Excel Paralubes joint venture with Pennzoil-Quaker State), whereas Phillips had well-recognized motor oil brands but lacked its own base oil supply. Excel Paralubes is North Americas second-largest base oil refinery, with capacity to produce 21,300 Group II barrels per day.
Liberti stopped short, though, of saying that ConocoPhillips would keep more base oil in house to blend in Phillips motor oils. Depending on market conditions and the ingredients mix for those lubes, the number of barrels sent to market could change little, he said.
Base oil buyers and sellers this week seemed more willing to jump to conclusions. They predicted that ConocoPhillips will certainly use more Excel Paralubes product than Conoco did. The only question, they said, is how much more.
Phillips itself was certainly one of the largest base oil users in this country without its own supply, a marketer said yesterday. My impression is that theyve been buying mainly Group I, but Im sure the trend will be to maximize use of their own supply and to start to convert to Group II. This will especially be the case as motor oil standards are upgraded.
Theres a lot of speculation about this. I think the ConocoPhillips people are the only ones who know for sure.
Of course, if Phillips does use more of Conocos stocks, it wont change the overall amounts of base oil produced or consumed in the United States. It would, however, take some Group II supply out of the merchant market, a fact that concerns some independent blenders.
I think the proof is in the pudding with what weve seen from every other merger, a blender said. Anytime this happens, it takes more base oil off the open market. That takes competition out of the market and leads to higher prices and products becoming unavailable. I cannot imagine how this helps independents.
Base oil postings by principal U.S. suppliers were unchanged this week.
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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