With the U.S. base oil market practically closed for the holidays, producers and consumers are turning their attention to 2002. Sources said the market remains volatile, although purchasers are hoping for further price reductions.
Already slowed by the onset of the lubricant industrys winter lull, base oil sales activity came to a near standstill last week due to holiday vacations. Despite the current calm, however, buyers and sellers agreed that 2002 will probably open with nearly the same level of uncertainty that has characterized the market for the past few months.
The Organization of Petroleum Exporting Countries is scheduled to meet Friday to consider crude oil production cuts and markets watching to see if the group succeeds in raising prices toward its target range of $22-$28 per barrel. Crude prices closed Wednesday at $19.48 per barrel on the New York Mercantile Exchange.
The base oil market is also waiting to see if lubricant demand, which has been lower than normal during the second half of 2001, returns to normal levels after the seasonal slowdown. Production of lubricants – especially motor oils – typically increases during the first quarter as the industry readies for the spring and summer driving seasons.
I think things are just as unpredictable as they have been, one base oil marketer said. We dont know what might happen to crude and its hard to tell yet where the economy is going. The future is just impossible to predict.
Base oil purchasers remained optimistic about the likelihood of another round of price cuts, after one reduction in mid-October and another beginning the end of November.
I think theres a lot of (base oil) inventory, right now, one major purchaser said. If crude stays low, were going to have more downward pressure on prices in the second half of January.
Historic U.S. posted base oil pricesand WTI and Brent crude spot prices are available for purchase inExcel format.
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