The first quarter of this year saw a series of price drops in the paraffinic base oil market and one round of changes in the naphthenics market through mid-March before quieting down.
This year the normal March or April seasonal increase in demand seems to be back, an industry source told Lube Report yesterday. It seems like theres easily an adequate supply to handle demands in the market. I think this year is more representative than last year was, since there havent been any – other than Chevron down in Richmond – production problems to speak of. It seems like after the last couple of years, this is what Id actually call a normal year.
Chevrons Richmond, Calif. refinery – which has capacity to make 20,000 barrels per day of Group II and Group III paraffinic base stocks – originally went into turnaround in mid-January with plans for completion about March 1. A Jan. 15 fire within the refinerys crude separating unit forced Chevron to extend the turnaround into early April. Otherwise, operations have been blissfully routine. Earlier in the year, Calumet Specialty Products completed a 10-day turnaround at its Shreveport, La. refinery in mid-January while Motiva completed a scheduled three week turnaround at its Port Arthur, Texas refinery in mid-March.
By contrast, last years first quarter saw a variety of fires and explosions that besieged base oil plants and disrupted North American supply. A January fire at Petro Canadas Mississauga, Ontario plant put a 6,250 b/d Group II train out of commission until late March. And a Feb. 1 explosion knocked out Excel Paralubes 21,000 b/d Group II plant in Westlake, La., until the first week of April.
ExxonMobils Beaumont, Texas plant – knocked out by Hurricane Rita in September 2005 – remained down for nearly four months until late January 2006, removing 12,500 b/d of Group I capacity from the U.S. supply. Motivas 15,000 b/d Group II Port Arthur expansion was held up six weeks until late March, followed by a maintenance turnaround in another unit. And briefer, routine maintenance turnarounds closed the taps at Ergons paraffinic plant in Newell, W. Va.; and San Joaquin Refinings naphthenics plant in Bakerfield, Calif.
The end result of all the supply disruptions were supply allocations and three rounds of rapid-fire price increases in early 2006.
The market finally appears to have shaken off the effects of last years supply disruptions, as shown in how stable U.S. base oil prices have been compared to this time last year. Last years first quarter saw three rapid-fire rounds of price increases totaling 28 cents to 30 cents per gallon. The price cuts during this years first quarter have given back about half that amount.
Posted paraffinic base oil prices are unchanged in the United States this week. Crude closed at $64.58 per barrel yesterday on the New York Mercantile Exchange, according to Bloomberg. That was $1.48 above the price a week ago.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.