Concerns over whether a tropical storm brewing in the Gulf of Mexico would materialize and become a hurricane were squelched early yesterday, as tropical storm Edouard hit landfall just east of Galveston, Texas.
Despite the weather system not reaching full hurricane status, market watchers are keeping a close eye on the impact the severe storm could have on the U.S. Gulf coast between Houston, Texas, and Lake Charles, La. This is a vital area for refining, terminaling and tankage, and is home to a number of blending and packaging facilities.
Following a warning put into effect from the mouth of the Mississippi River to Port OConnor, Texas, by the U.S. National Hurricane Center on Monday evening, several Houston area refiners began to operate at reduced rates as a precautionary measure in advance of the storm. The port of Houston was also shut down.
Base oil players drew a deep breath and hoped that there would be no repeat of the damage that followed Hurricanes Katrina and Rita. These two storms wreaked havoc in the same region three years ago, disrupting the base oil market for months.
Suppliers reiterated that the base oil supply situation is already in jeopardy, and any disruption by an aggressive tropical storm would not be welcomed.
In the meantime, this weeks market was fairly quiet, and no fresh price developments were heard. Spot activity remained thin in the face of scarce availability.
Producers continue struggling to satisfy all contractual orders, literally operating on a hand-to-mouth basis in some cases. Suppliers stress that any additional requirements over and above historical volumes would likely go unfulfilled. As it stands, even scheduled shipments face delays of up to four weeks.
On a more positive note, crude oil values continued to slide this week, shedding about $4 per barrel just in the past few days and reaching levels around $118 to $119/bbl not seen since early May.
At the close of the Tuesday, Aug. 5, NYMEX session, front-month oil futures settled at $119.17 per barrel, down $3.02 from the $122.19 settlement reported one week ago.
Carolyn L. Green, based in Houston, can be reached directly at carolynlgreen@gmail.com.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.