The Memorial Day holiday on May 29 dampened activity in the U.S. base oil market, but a lack of readily available spot cargoes also played a part in the subdued trading scene.
Spot prices have inched up over the last few weeks, but participants said that even if buyers were willing to purchase product at the higher levels, it was difficult to locate sizeable lots, particularly of the heavy-viscosity grades and bright stock.
The tight supply and demand ratio is the result of recent turnarounds at a couple of large U.S. base oil plants, combined with healthy demand – both at home and abroad – since early in the year.
An upcoming turnaround at one of Motiva’s three base oil trains at the producer’s refinery in Port Arthur, Texas, is expected to limit supply further, despite the fact that the producer was anticipated to continue meeting contractual obligations during the outage. The turnaround was understood to be slated for June. Motiva’s base oil plant has capacity to produce 40,300 barrels per day of Group II oils when all the trains are running.
Avista Oil will also be embarking on a brief turnaround at its re-refinery in Peachtree, Ga., the first weekend in June, and expects to be in a very tight supply position throughout the month. Avista produces 1,200 b/d of Group II and 400 b/d of Group III oils.
It was also heard that re-refiner Vertex Energy had completed a planned maintenance program at its 1,500 b/d Group II Heartland re-refinery in Columbus, Ohio, during the first quarter of the year, even though the outage had originally been planned for the second quarter.
On the naphthenic front, demand was described as strong across the board, straining supply levels. A producer noted that requirements for the 40, 60 and 100-vis cuts were booming, and the seller was not able to ship out additional product because of a lack of available railcars.
A second pale oil supplier agreed that both domestic and export requirements had been very healthy and that there were few parcels offered on a spot basis at the moment.
While the snug conditions for naphthenic as well as paraffinic oils were expected to last through at least July, some participants also reasoned that once all plants were back on stream and demand started to wind down after the summer driving season, suppliers might find themselves with plenty of base stock barrels to place.
Upstream, crude oil prices slipped on Tuesday – prolonging a downward trend that had started the previous week – but losses were capped by expectations that U.S. data would reveal a further decline in crude supplies.
West Texas Intermediate futures on the CME/Nymex settled at $49.66 per barrel on May 30, down $1.81/bbl from $51.47 per barrel on May 23.
Light Louisiana Sweet wholesale spot prices closed at $51.63 per barrel on May 26 (there was no trading on May 29 due to the Memorial Day holiday), and had settled at $53.06/bbl on May 22, according to data from the U.S. Energy Information Administration.
Brent was trading at $51.84/bbl on the CME on May 30, down $2.31/bbl from $54.15/bbl on May 23.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.