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Base Oil Report


Heading into the last quarter of 2007, U.S. base oil participants wonder if the market will end on a balanced supply note, or if there will be an overhang. Presently there is an apparent surplus of paraffinic base stocks in the United States and Europe. And because of this position, some suppliers main concern is that prices will continue to erode. Others speculate that prices should remain steady, given a spate of planned downtimes now under way or about to commence in the United States.

Exacerbating supply worries, climbing raw material costs weigh heavy on base oil producers shoulders. The energy complex has seemingly entered a bullish mode and industry analysts expect oil and gas values to continue to climb. Light sweet crude costs swelled in September and reached fresh highs by the middle of the month at over $80 a barrel. This came on the heels of government reports that there were surprisingly large drops in crude inventories and declines in gasoline supplies and refinery activity.

The report from the Energy Departments Energy Information Administration suggested oil supplies are tightening as demand remains strong. Thats why oil prices are rising despite OPECs September 11 decision to boost crude production by 500,000 barrels per day this fall, analysts said.

As for upcoming shutdowns, they began when ExxonMobils 16,500 b/d Baton Rouge, La., facility was taken off line mid-August for an extended planned outage. Its due back on stream as this issue goes on press. Sources also said that the companys 21,500 b/d Baytown, Texas, lubes plant would be brought down this month, for a short downtime involving only one unit. Whether the ExxonMobil 12,500 b/d Beaumont, Texas, plant would be shut down during the fourth quarter for a scheduled turnaround, as previously reported, was not clear.

Citgos 9,500 b/d Lake Charles, La., facility was scheduled to go off line in late September for approximately three to four weeks; American Refining Group plans a 10- day turnaround early this month at its 2,400 b/d plant in Bradford, Pa; Valero has scheduled a fourth-quarter turnaround in Paulsboro, N.J. (11,500 b/d); and Ergons 11,300 b/d Vicksburg, Miss., facility will be in turnaround for about four weeks commencing in early January. This last shutdown is also for preparatory tie-in work before a major expansion, which next fall will give Vicksburg another 7,600 b/d of capacity.

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