With their market quiet in Decembers shadow, U.S. base oil suppliers are preparing for the industrys normal winter lull. Some marketers, however,are concerned that sales may drop off more than usual this year.
Base oil sales typically hit their lowest levels of the year in winter, mostly because of slowdowns in lubricant production. In addition, blenders in some states try to empty storage tanks as much as practical in order to avoid year-end inventory taxes.
Opinions differ as to whether this years hibernation has set in yet. Sales of Group I stocks, especially lighter grades, appear to have slowed more than medium- and heavy-viscosities or premium stocks.
Suppliers agree that the economy will be the biggest factor in determining whether sales are scarcer than usual this winter. So far, there has been little to cheer about on that front. In fact, the economy may have given a head start to the slowdown.
My impression is that sales have begun to fall off already but that it may have more to do with the general weakness of the economy than with any seasonal cycle, one marketer said. I think we also saw quite a bit of pre-buying the past few months in anticipation of the last two price increases [in September and October].
When you combine all these factors, I think the end of this year may be a little worse than normal – worse than two years ago, although probably not as bad as last year.
Base oil prices were unchanged this week. There was also little change in crude oil costs from last week, although crude prices have fluctuated from day to day in reaction to developments in the conflict over United Nations weapons inspections in Iraq. Crude climbed 29 cents on the New York Mercantile Exchange yesterday to close at $26.40 per barrel.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.
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