NewsFlashUS CITGO said to exit lubes, waxes

16 June 2008 16:51  [Source: ICIS news]

HOUSTON (ICIS news)--The base oils and wax market could tighten even further as producer CITGO was said on Monday to be preparing to close its Lake Charles refinery, the second such industry closing in as many months, industry sources said.

In a letter to buyers obtained by ICIS news, CITGO announced it will eliminate production at the Lake Charles lubricants and wax refinery in Louisiana during the third quarter. No dates were given in the letter.

“Consistent with our current practice, any purchase orders for base oils placed with CITGO will be subject to review by sales management prior to acceptance,” the letter said.

CITGO did not have an immediate response. The plant produces 9,500 bbl/day of Group I paraffinic base oils according to the National Petrochemical and Refiners Association (NPRA).

The decision follows a similar move by US base oils producer Marathon, which told buyers in April it would close its Kentucky lube plant by the end of the year.

One buyer said CITGO was in the process of reducing production now and it would be closed by the end of the week.

“I think everyone saw this coming after their letter at the end of March,” a buyer said.

The closure places even more pressure on a market that is already contending with tight supply, the buyer said, adding that Group 1 300 viscosity base oil would become nearly impossible to find without CITGO or Marathon in the market anymore.

CITGO’s posted price for 300 viscosity base oil was $3.99/gal (€0.69/litre), according to data from global chemical market intelligence service ICIS pricing.

ExxonMobil and Ergon are the only refiners left that sell that particular grade, a buyer said.

The US base oils market has been struggling with record costs brought on by feedstock vacuum gas oil (VGO) and crude oil.

($1=€0.65)

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By: Heather McGuire Doyle
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