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Base Oil Report


Expectations that the base oil market would be entering the summer in a state of oversupply due to the introduction of additional capacity from Chevrons new plant in Pascagoula, Miss., were dashed by the realization that the wild card that buyers were so eager to welcome – and other producers were dreading – will not come into play until late June or early July.

Chevron has maintained that the majority of the 25,000 daily barrels of API Group II from the new plant has already been allotted to certain customers or to export operations, but market players still feel edgy about the effect the added volume will have on the U.S. supply balance and overall prices.

However, participants will apparently be able to hold their bets for a while longer, as Pascagoulas start-up process has been slightly delayed, and the market is actually teetering on a tight supply-and-demand line.

The dwindling availability and potential shortages have been brought on by healthy spring demand, coupled with recent, ongoing and upcoming maintenance programs.

These include a March-to-April shutdown at Paulsboro Refinings 11,000 b/d Group I facility in New Jersey, and the April-to-May turnaround at Calumets Group I and II plant in Shreveport, La. Calumet acknowledged early on that some of its shipments might experience delays because of the outage at this 11,900 b/d site.

An extended turnaround at the Excel Paralubes facility in Westlake, La., could really put a crimp in Group II availability. The units output, which is shared 50/50 by Flint Hills Resources and Phillips 66, is expected to be out of the game for about 58 days, starting this month. The suppliers were heard to be building inventories to meet contractual requirements during the hiatus, and were therefore abstaining from participating in the spot market, some participants said.

While Motiva was holding its cards close to its chest, it was heard that this Group II producer had declined new business as well, and had reduced its export volumes given a tight position.

The scant base oil stack is not likely to improve substantially until August, when production is expected to resume following the turnarounds, the new capacity comes on stream, and demand starts to lose steam as the market heads into the fall season.

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