Base Oil Pricing Report

Base Oil Report

Share

Base oil buyers and suppliers typically begin preparing for flourishing spring activity several months in advance, figuring out potential product needs, forecasting price trends and planning production in order to avoid unpleasant surprises.

However, if there is one thing players cannot control, it is natural phenomena, and adverse weather can spoil what could otherwise be a solid and successful season.

This is what happened back in 2017, when terrible hurricanes pummeled the United States Gulf Coast, leaving behind extensive damage to base oil facilities. More limited but no less devastating were the severe storms and heavy precipitation that resulted in historic flooding, critical damage to dams and mandatory evacuations in the Midwest this spring. The floods left some towns virtually under water, and also affected industrial production and transportation in and out of the area.

One of the base oil plants affected by the severe weather was HollyFrontier’s API Group I unit in Tulsa, Oklahoma, which has capacity to produce 9,500 barrels per day of base stocks. The refinery was taken offline for several days as a precautionary measure due to concerns about a potential failure of the levees. If the refinery had flooded, it would have suffered extensive damage. The producer began the restart process on June 4 and base oil production resumed on June 8.

The outage came on the heels of a number of planned and unplanned domestic plant shutdowns and a steady stream of orders, resulting in snug supply of certain base oil grades. While availability could still cover requirements, extra spot barrels were harder to come by, with bright stock cargoes said to be particularly difficult to find.

Tightening supply started to exert upward pressure on base oil pricing, but sliding crude oil and feedstock values and the availability of alternative base stocks tempered the potential of price adjustments.

Crude futures were expected to remain undermined by a persistent supply surplus against rising shale production, a slowing global economy and the prospect of an ongoing trade conflict between the U.S. and China. Base oil market participants will surely keep a close eye on crude oil price behavior, together with demand levels from the lubricant segments, as the industry traverses the sometimes tricky summer driving season.

Related Topics

Base Oil Pricing Report    Base Stocks    Market Topics