26 May 2010 20:46 [Source: ICIS news]
HOUSTON (ICIS news)--Tight supplies in the US base oil market will likely continue for the next 45-60 days and could worsen if production issues or hurricanes appear, sources said on Wednesday.
“Hurricane season begins on 1 June, and inventories are far too low to even consider contingency plans at the moment,” a US seller said.
The US base oil market had been snug for several weeks because of reduced production, planned and unplanned maintenance and demand that had far exceeded the expectations of buyers and sellers.
Several buyers said that supply was now tighter than it had been in several years.
“We lived through a tight spell after hurricanes Gustav and Ike in 2008, but this is worse,” a buyer said.
Bright stock buyers received more challenging news this week as Holly placed its customers on sales control.
The sales control would be for 50% of the last six month’s purchases, according to buyers. The refiner in Tulsa, Oklahoma, said it was unclear how long the sales control would last as it struggled to build inventory while demand outpaced production.
Ergon restarted its Newell refinery in West Virginia on 19 May and was now running at full rates on the lube units. However, inventories were low coming out of the turnaround which began on 11 April, the refiner said.
Ergon’s Newell plant produces 1,900 bbl/day of Group I base oils and 2,900 bbl/day of Group II base oils.
Motiva remained on a 50-75% allocation for its Group II base stocks.
A buyer said that the largest Group II refiner had restored full capacity for all three lube streams at Port Arthur, Texas, but it would take a considerable amount of time to rebuild inventories.
The time period for the allocation was also indefinite, but some buyers said they had heard it could last another 30 days, and even then inventories would be low.
Motiva declined to comment on the status of the Port Arthur refinery or on the allocation.
Calumet’s refinery in Shreveport, Louisiana, was running after an extended turnaround in April. However, some customers were experiencing delays as the company caught up on back orders.
Calumet’s Shreveport plant produces around 4,800 bbl/day of Group I base oils, 7,000 bbl/day of Group II base oils and 100 bbl/day of naphthenic base oils.
American Refining was back to normal rates following an outage earlier in the month. The refiner said that demand for bright stock had been extremely brisk and it was not able to entertain any new spot offers immediately.
The Bradford refinery in Pennsylvania produces 2,100 bbl/day of Group I base oils and 300 bbl/day of Group II base oils.
Amid the vast array of production headaches, demand had increased above earlier forecasts in the US and in Latin America, pushing large-volume contract buyers into the spot market to secure additional material.
“Securing large spot volumes of Group I, II and III paraffinic base oil spot material in the US Gulf for June is virtually impossible,” a trader said.
Even small quantities were difficult to source, and the few trucks and railcars that were shipping are at or above posted price levels, buyers and sellers said.
($1 = €0.81)
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