Excel Paralubes shut down its Westlake, La., base oil refinery this week for a maintenance turnaround that is scheduled to last for 21 days. The closing had long been slated to begin in October, but the company moved it up after deciding that the work needed to be done sooner rather than later.
Currentlya 50-50 joint venture between ConocoPhillips and Shell Oil Products US (Shell is selling its stake to Flint Hills Resources), the refinery has capacity to produce 21,500 barrels per day of Group II base oil. The Group II market is already snug, and market sources expected the accelerated schedule to further tighten supply, since it left less time for the partners tobuild inventories. The situation was exacerbated last month when the base oil plant lost a week of production due to a power outage.
Meanwhile, sources said that any downward pricing pressure has probably eased due to the recent rebound in crude oil costs. The price of crude on the New York Mercantile Exchange closed at $31.68 per barrel yesterday, up 99 cents from a week earlier and more than $6 higher than in late April. Paraffinic posted prices have not changed since rising in late February and early March, but buyers and sellers agreed there was a degree of downward pressure when crude costs fell by almost one third from their mid-March peak above $37. Not any longer, sources said this week.
I think there was some leaning for [base oil] prices to fall, but things are neutral now that crude has crept back up, one marketer said.
Suppliers said they did not see the seasonal increase in sales that they had hoped to enjoy this spring. Base oil sales typically rise when the lubricant industry emerges from its winter lull and motor oil blendersgear up for the spring and summer driving seasons. While sales did rise this year, several marketers said the increase was smaller than usual.
Its not been a normal year, one marketer said disappointedly.
U.S. posted paraffinic base oil prices remain unchanged.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.