The summer doldrums continue to keep a tight hold on the U.S. base oil market. Overall activity is quiet, with availability of various grades showing some length. Sources said that price ideas for contract business is steady, but spot offers are revealing some steeper discounts heading into the second half August.
The most talked about subject currently is centered on the disturbance at the Chevron refinery in Richmond, Calif., where just over a week ago a fire broke out in the crude unit and caused extensive disruption. Although unconfirmed by Chevron, there is speculation by a number of market observers that the plant could be offline for several months. At present, the Richmond refinery is operating at 60 percent capacity, according to industry experts.
With regard to base oil production at the site, details remain quiet. Sources say that it will take some time for Chevron to sort out the situation at hand as it is still too early to decipher the extent of damage done. Direct buyers of Chevron acknowledged that there has been no interruption in deliveries yet, but they anticipate that the West Coast major supplier could possibly step out with updated information later this week, which could feasibly include details of a sales allocation program.
Meanwhile, there is chatter among a number of players about the growing availability of a number of paraffinic grades. A few sources said that producers are becoming a bit more aggressive with spot offers compared to earlier this year, when product was in better balance – and even tight in some situations. But with the summer vacations and the lingering uncertainty in Europe, domestic supply has built back up, and now several suppliers have surplus product that they are trying to get rid of.
The naphthenic supply picture is in better shape, sources add. Light end pale oils are still well balanced to tight, but there is some length for heavier cuts now on offer, buyers suggested.
A two-week planned turnaround is scheduled to commence mid-week this week at the Lyondell Houston Refinery naphthenic plant. Calumet is the selling agent for all naphthenic production at this site. Customer orders are expected to be filled as normal during the downtime due to earlier preparation of inventories.
At the close of the Tuesday, Aug. 14, CME/Nymex session, front month light sweet crude oil futures ended the day at $93.43 per barrel, marginally down by 24 cents/bbl from last weeks settlement at $93.67.
Brent Crude was trading at $114.08/bbl at the end of the day yesterday, up by $2.14/bbl from its week-ago level of $111.94. LLS (Light Louisiana Sweet) crude was trading at a premium of about $19.75/bbl to WTI on Tuesday.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.