Purchasers of Group II base oils say the two newest U.S. suppliers have been welcome additions to the market. The entrance of Flint Hills Resources and increased output from Calumet Lubricants have reportedly yielded attractive prices.
Flint Hills Resources ventured into the base oil business last summer, when it bought Shell Oils 50 percent stake in Excel Paralubes, a joint venture with ConocoPhillips that operates a 21,300 barrel-per-day Group II plant in West Lake, La. Shell sold the stake as part of a consent agreement with the U.S. Federal Trade Commission, which said the deal could call for Flint Hills to continue supplying Shell for up to one year. But Flint Hills indicated late last year that it had begun looking for new customers.
Calumet began producing Group II stocks at its Shreveport, La., refinery in late 2002 and increased its output late last year.
In terms of volume, the overall impact from these two suppliers is relatively small. Flint Hills, of course, has not caused any change in the net amount of base oil on the market. Calumets plant has capacity to produce 9,000 b/d, but some of that is Group I.
Still, observers said the companies have been offering attractive prices, apparently as part of efforts to build their businesses.
Their volumes arent that big, one observer said. But anytime you have that kind of influence in the market, it affects other suppliers as well, and puts pressure on prices for the whole market.
While agreeing that the new kids are making their mark on the block, sources said the relief on prices may disappear after Flint Hills and Calumet build their accounts.
Id love to think its a long-term situation, one buyer said. But Im afraid its not.
Base oil posted prices in the United States were unchanged this week. The price of crude oil on the New York Mercantile Exchange closed yesterday at $34.63 per barrel, 52 cents lower than a week earlier.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.