Shell Oil Products US has nearly wrapped up production at its Deer Park, Texas, base oil plant, although the final barrels may not be sold for nearly two months.
In line with plans laid out in December when the company announced the closure, the plant stopped producing naphthenic base stocks at the end of March. It expects to stop producing paraffinics next week. Officials said the company will continue selling product in the following weeks but is supposed to end all operations by mid-June.
The plant has capacity to produce 4,500 barrels per day of Group I paraffinics and 5,000 b/d of naphthenics. Observers have said that the closures biggest impact will be on the naphthenic market, which will lose another 4,700 b/d of capacity when Shell closes its Martinez, Calif., naphthenic plant Sept. 1. Together, the Shell plants account for one-fifth of U.S. naphthenic capacity.
The loss of Deer Parks paraffinic barrels is expected to be felt most strongly in the bright stock market. According to some, bright stock has made a quick recovery from last year, when supply was loose and margins were thin.
The main impact for paraffinics is going to be with bright stock, one marketer said. All the time, there are fewer and fewer companies capable of producing bright stock. Business has really improved recently. Its quite strong now. And the shutdown of Deer Park is going to reinforce the position of suppliers.
Crude oil costs on the New York Mercantile Exchange dropped 3 cents yesterday to close at $27.96 per barrel, down $1.28 from a week earlier.
U.S. posted prices for paraffinics were unchanged during the past 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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