Extremely tight supply conditions acted as the protagonist of the base oil market during May and June. A majority of producers reported sold-out positions, and were only able to participate in contract business while turning away spot opportunities.
The situation supported fairly stable posted prices for paraffinic oils, but led to increases for spot transactions and for naphthenic products.
In early June, naphthenic base oil producer Cross Oil communicated increases of 15 cents per gallon, naming prevailing market conditions as the leading figure behind the initiative.
Pale oil suppliers agreed that the market was balanced-to-tight and that they had been receiving a steady stream of orders, many of which had to go unfulfilled.
On the paraffinic front, requirements for API Group I, II and III base oils were lively and suppliers inventories remained low to non-existent.
The strained supply and demand balance was the result of a combination of healthy demand and recent and ongoing plant shutdowns in the United States.
Turnarounds at the Excel Paralubes plant in Westlake, Louisiana, and at the Chevron plant in Pascagoula, Mississippi, earlier in the year, together with a 47-day shutdown at one of Motivas base oil trains in Port Arthur, Texas, starting in May, resulted in greatly reduced Group II availability.
There were also rumblings that Chevrons Group II plant in Richmond, California, was expected to undergo a maintenance program from late May until mid-June, although producer confirmation was not forthcoming about any of the turnarounds.
On the naphthenics front, it was heard that a fire had erupted at the Refineria Isla refinery in Emmastad, Netherlands Antilles, causing the shutdown of a few production units in late May. Nynas-responsible for marketing products from the base oil plant there-reported that the unit had resumed production on June 6.
Even though a few participants predicted that the strained conditions would ease by July, there were expectations that the tightness may persist until September. As noted over the last couple of years, nothing can be taken for granted in the base stock market, and changes may occur quickly and unannounced, rendering a completely different scene to what everyone had anticipated.