US base oils struggle with inventory on storms

10 September 2008 18:19  [Source: ICIS news]

HOUSTON (ICIS news)--US base oil markets remained firm for the tenth consecutive week as market participants reacted cautiously to what has quickly become a busy hurricane season, buyers and sellers said on Wednesday.

Base oil facilities in the coastal regions of Louisiana and Texas were either shutdown or forced to reduce operating rates ahead of Hurricane Gustav, which hit the Louisiana coast on 1 September.

Although the base oil refineries have now restarted, buyers and sellers were quick to point out that the progress seen over the week could be for nothing if Hurricane Ike continues along its forecasted path towards Texas.

Excel Paralubes, the base oils joint venture between ConocoPhillips and Flint Hills Resources, was shut down ahead of the storm, according to buyers, but restarted quickly. Buyers confirmed material was shipping by the weekend, just four days after Gustav struck Louisiana.

A few large-volume buyers said Excel was, however, struggling to maintain balanced inventories.

Excel’s facility in Westlake, Louisiana, produces 21,900 bbl/day of Group II and III base oils, as well as 21,900 bbl/day of finished lubricants.

ExxonMobil lost at least a week of production at both the Baton Rouge facility in Louisiana and the Beaumont facility in Texas. Buyers said the plants had restarted, but the supplier was struggling more than expected to recover full capacity.

Downstream additive companies such as Chevron Oronite and Lubrizol were still struggling based on lack of availability for raw material base oils, a buyer said.

The base oils supply situation remained tight, and it was due to get worse, with Motiva entering a 45-day turnaround at the end of September and Petro-Canada entering a 30-day turnaround in October, market participants said.

There was talk of spot material offered at a premium to posted levels, but little to no material available to trade, a trader said.

Bright stock oils were last traded at $5.67-$5.75/gal, according to data from global chemical market intelligence service ICIS pricing. 

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By: Heather McGuire Doyle
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