Calumet sees pressure on US base oils prices

OREANDA-NEWS. Calumet Specialty Products expects downward price pressure on its paraffinic base oils though 2015 as increased US Gulf coast capacity enters the market.

The company's paraffinic base oils supplies have been long following the start of Chevron's 25,000 b/d Group II plant in Pascagoula, Mississippi, in July, executives said on an earnings call. Calumet cut the posted price for its Group I and Group II base oils five times between August and December because of increased supply and weaker year-end demand.

The company scaled back base oil production in response to weaker prices. Calumet produced less base oils at its 11,900 b/d paraffinic refinery in Shreveport, Louisiana, and 6,900 b/d naphthenic plant in Princeton, Louisiana.

Calumet produced 11,438 b/d of paraffinic and naphthenic base oils over the quarter, down from 14,303 b/d in the third quarter and 13,247 b/d in the same quarter last year.

While base oils production fell, the production of alternative products such as waxes, diesel, and asphalt increased. Diesel production was 29,199 b/d, up from 28,540 b/d in the previous quarter and 25,837 b/d in the fourth quarter of 2013.

Calumet produced 2,077 b/d of waxes, up from 1,538 b/d in the third quarter and 1,800 b/d during the same quarter last year. The company produced 20,661 b/d asphalt and heavy fuel oils, up from 17,852 b/d in the last quarter of 2013.

Calumet's specialty products margins were stronger in the fourth quarter despite a drop in base oil production and sales. The specialty products segment's gross profit increased to \$26.2mn, up by 33.2pc from the fourth quarter of 2013, benefiting from lower crude and feedstock prices and recent acquisitions.

Despite the base oil production cuts, Calumet reported no major maintenance issues at its refineries. Calumet will complete four expansion projects totaling \$640-650mn in the next year.

The company reported net income of \$65.5mn in the fourth quarter, excluding special items, compared to net loss of \$20.1mn a year earlier.