A consultant told an industry conference that lubricant companies can benefit from crude oil price volatility if they carry minimal inventories, accurately forecast sales and use a mix of long-term and spot contracts for base stock procurement.
Adopting a model for working capital is one of the critical success factors for lubricant companies to get the most of the crude price volatility, according to Shailendra Gokhale, managing partner of Mumbai-based Rosefield DAA International Consultancy LLP.
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“You can’t afford to carry higher inventory of base oil when probably the prices are going to fall,” he said at the Asia, Middle East and Africa Bitumen and Base Oil Conference, organized by Petrosil Group. “He added the huge inventory will become a burden and cost working capital as well as hit the companies bottom and top lines.”