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Base Oil Report


Unlike some complex mathematical problems, it was fairly easy to figure out the likely outcome of a number of factors affecting base oils between March and June.

Paramount among them was a succession of plant turnarounds, both in the United States and abroad, that led to infinitesimal availability of a number of grades.

A turnaround at the Excel Paralubes API Group II unit in Westlake, Louisiana, which started in early March, was expected to last approximately 52 days, while the Chevron Group II unit in Pascagoula, Mississippi, was likely to be down for 22 days in April. Maintenance was also scheduled at Ergons plant in Newell, West Virginia, in late March/early April; and at one of Motivas three base oil trains at Port Arthur, Texas, in June.

Additionally, there were several facilities in Europe, Singapore, South Korea, China and Japan that were expected to be idle during the same time frame, while the extended shutdown at the Shell-Qatar Petroleum Pearl GTL facility in Ras Laffan, Qatar, took significant amounts of Group III out of the global market.

The production shutdowns, together with healthy demand during the spring season, resulted in very limited availability, with some producers said to be holding negligible inventories and several of them abstaining from offering product for spot transactions.

Not surprisingly, paraffinic base stock producers raised posted prices in March, with numbers moving up 10 to 25 cents per gallon, depending on the supplier and the product. On the naphthenic front, two producers lifted prices 15 cents in late March.

In mid-April, ExxonMobil and Kleen Performance Products announced another increase between 15 and 20 cents, varying by grade, effective May 1.Whether these hikes would be pushed through in their entirety was uncertain, as buyers were resisting the initiatives at the time of writing.

Crude oil and feedstock prices dipped in late March, but recovered lost territory in early April on expectations that OPEC would continue to curb output as agreed late last year.

With all these factors at play, suppliers saw ample justification for the domestic price increases. But the probability that the upward momentum can be sustained is unclear, once the summer doldrums set in, demand starts to recede and plants resume production.

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