Unlike cryptocurrency markets, the base oils sector navigated through fairly smooth waters this week, with posted prices reported as stable despite the current supply and demand imbalance. Some producers have cut back production rates to manage mounting inventories and avoid price deterioration. Some refiners were streaming more feedstocks into distillates output, while others have lowered price expectations as a means to attract orders before the end of the year.
The base stock oversupply situation has not come as a surprise, as availability tends to lengthen in the last quarter and suppliers typically adjust production rates accordingly. This year, the fact that diesel prices have spiked amid a global supply crunch offered even more of an incentive for light viscosity cuts to go into diesel and for more feedstocks to be apportioned to distillates production given better margins.
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