FocusUS base oil supply tightens on outages, improved demand

10 February 2010 17:47  [Source: ICIS news]

HOUSTON (ICIS news)--Planned turnarounds, closures and already low refining rates are tightening US base oil supply just as demand is beginning to improve, sources said on Wednesday.

Excel Paralube’s 21,900 bbl/day Group II base oil plant in Westlake, Louisiana, went down for a planned 25-day turnaround in January, buyers said. In addition, one of the three trains at Motiva’s 40,300 bbl/day Group II base oil plant in Port Arthur, Texas, also went down for a planned turnaround at the same time, buyers and traders said.

It was unclear if either base oil facility had returned to full operating rates. The refiners did not immediately return calls seeking comment.

An unplanned halt in production at Calumet’s Shreveport, Louisiana, refinery would likely tighten base oil supply, especially for the heavy grades, sources said.

Base oil buyers learned recently that Canada’s Imperial Oil would quit making base oils, process oils and wax at its Sarnia, Ontario, refinery in 2011.

The announcement is the second Canadian refinery to announce it would quit making base oils this year.

Shell Canada announced in January it would convert its 130,000 bbl/day crude oil refinery in Montreal to a fuel terminal for gasoline, diesel and aviation fuels. The refinery includes a 2,700 bbl/day Group I base oil and 1,300 bbl/day unfinished wax plant.

Meanwhile, base oil buyers say demand is steady, and they are also expecting an uptick in requirements in March/April time frame.

“Demand is always weak in January/February, but we are certainly buying a little more now than this time last year,” a buyer said. “And we will request more volumes in the spring.”

The buyer added that heavier grades such as 500-700 and bright stock continued to be the most popular.

Bright stock last traded on the spot market from $3.05-3.17/gal ($900-935/tonne or €657-683/tonne) FOB (free on board) USG (US Gulf), according to data from global chemical market intelligence service ICIS pricing 

A seller said that domestic orders had been very heavy over the past week, indicating that the typical spring buying season had begun early.

“I think buyers need the base stock to fill finished good orders, which are coming in to beat price increases,” the seller said.

Several finished lubricant sellers have recently announced price increases of around 10% or more, and many will take effect in March, the base oil seller added.

($1 = €0.73)

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By: Heather McGuire Doyle
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