The main topic of discussion in the U.S. base oils market is the tightening supply situation, which is not likely to see relief any time soon as more turnarounds are about to begin, while the introduction of new capacity has been slightly delayed.
Talk that the additional product from the new Chevron API Group II plant in Pascagoula, Miss., would not come to the market in late May or early June as previously expected intensified this week. Chevron was anticipated to have commercial product available from its new 25,000 barrels-per-day plant in the next few weeks, but the schedule appears to have changed.
While there was no specific date mentioned for the introduction of the additional product, a Chevron spokesperson confirmed that the company had achieved mechanical completion of the plant in April, and expected to ramp up to full production by mid-year.
Meanwhile, availability of most Group II grades has tightened in the domestic market on robust demand and recent and current maintenance programs.
Calumets Group I and II Shreveport, La., facility was taken off-line in late April and was expected to be restarted on May 17. The unit has a capacity to produce 4,800 barrels per day of Group I base oil and 7,000 b/d of Group II cuts. While the supplier had tried to build inventories ahead of the shutdown, it also acknowledged that some customers might experience delivery delays.
Flint Hills Resources and Phillips 66 are about to commence an extended turnaround at their shared base oil facilities of Excel Paralubes in Westlake, La. According to market sources, the unit is expected to undergo a 58-day turnaround starting in June.
Phillips 66 is heard to be preparing for scheduled maintenance and will continue to supply its customers during the outage. The company is encouraging customers to contact their respective sales directors for specific details.
Motiva was holding its cards close to its chest, but it was heard that this Group II producer was not entertaining new business, and had reduced its export volumes given a scant supply situation–possibly caused by unexpected maintenance work at the crude oil refinery, although this could not be confirmed.
In the Group I segment, availability has also been reduced by the March-to-April turnaround at Paulsboro Refinings New Jersey base oil plant, and by various first-quarter production disruptions caused by adverse weather.
While another Group I producer, HollyFrontier, has not had a scheduled shutdown in the last few months, it was heard that the supplier had suffered some occasional production hiccups and was also in a tight supply situation.
Group III oils were in a more balanced position, with healthy demand supporting stable pricing.
Availability from rerefiners has also been scarce, sources said. Safety-Kleen was heard to have recently taken two units offline for maintenance. Heritage Crystal was also understood to be sold out and unable to supply additional product. As a result, it appears that some customers have had to procure more expensive base stocks from other suppliers.
On the naphthenics front, requirements have also been robust, particularly for transformer oil, and prices continue on a steady course.
Upstream, West Texas Intermediate crude futures climbed to a three-day high and were trading above $100 per barrel on expectations that reports would show that domestic crude stockpiles had been drawn down.
WTI settled on the CME/Nymex at $101.70 per barrel on May 13, up $2.20 from a settlement at $99.50/bbl on May 6.
Brent crude was trading around $109.24 per barrel on the CME, up $2.18 from $107.06/bbl a week ago.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.