While it may not be such a great time to buy or sell base oil, the dead of winter offers us leisure to look ahead at what hopeful notes may come with thawing weather – rather like browsing through seed catalogs.
The year began in a blah mood, with poor seasonal demand for paraffinic neutrals, observers said. This was attributed to lower demand for finished lubes, plus the need to absorb a flurry of year-end purchases. In December buyers had raced to fill tanks ahead of anticipated price increases, and the only pressure then on prices seemed to come from the upstream side.
Crude famously flitted up to $100 a barrel – that psychic high-water mark – but it retreated to loiter in the $90s as I write. Pointing to straitened margins, some refiners tried arguing that rising finished lube prices meant postings need to move up again, but with weak demand on their side buyers seemed able to hold the line.
This ho-hum atmosphere is unlikely to last long. Both new and improved U.S. capacity is coming onstream soon and may spur some excitement.
The first week of March will see new output pouring from a $220 million expansion under way at Calumets Shreveport, La., plant. The plant will gain 6,000 barrels per day of Group II base oil capacity, to reach a total of 15,000 b/d, and its wax capacity will more than double to 2,500 b/d. Logistically, the company has been bracing for this gusher for more than a year, a company official confided, with the goal of getting the product rapidly to market. Its railcar fleet has been expanding each month all year – it takes six to eight months for new railcars to be delivered – and more storage tanks have been leased at the nearby Red River Terminal to facilitate barge shipments.
Meanwhile, improvements are nearing completion at American Refining Groups Bradford, Pa., refinery which will upgrade two API Group I stocks starting some time next month. That project involved installing a new hydrogenation unit, at cost of nearly $20 million, and will result in Group I+ quality for its 150 neutral and bright stock fractions, company officials said. It will not change Bradfords overall capacity from its current 2,400 b/d.
Until then, if seed catalogs cant brighten the winter days, maybe vacation brochures will?