The U.S. base oil market remained quiet but watchful in the midst of the holiday season. Much of the industry has been on vacation for all or parts of the past two weeks, but a good deal of attention has been given to crude oil costs and the strike that has crippled Venezuelas petroleum industry.
Crude prices reached their highest levels in two years before easing yesterday. Prices on the New York Mercantile Exchange were at $32.65 per barrel before dropping to close at $31.37. Even after the falloff, prices were 15 percent higher than Dec. 2, when workers at state-owned Petroleos de Venezuela S.A. went on strike.
Analysts have attributed the jump in crude prices both to the strike – which reduced output by the worlds fourth-largest oil producer by 90 percent – and to the possibility of U.S. military action against Iraq.
But analysts also appear divided about the likelihood of crude remaining at such lofty levels, with some arguing that the crisis does not warrant such prices. Some noted that Venezuelan officials promised yesterday to double PdVSAs production next week and to double it again by the end of January. Others expressed skepticism about the Venezuelan governments ability to fulfill its promises.
In any case, the current level of crude prices is changing some peoples expectations about the direction of U.S. base oil prices in early 2003. Before crudes December escalation, many in the industry were speculating that base oil prices might be due for a cut in January. Now that fat margins have shriveled, some sources believe suppliers may be leaning in the opposite direction.
The situation has completely turned around, a supplier said yesterday. I think we could see an increase [for base oils] even if crude continues to drop a little. As long as it stays up above $30, I would expect to see an increase in January.
U.S. posted prices are unchanged this week.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.
|