With the U.S. base oil market continuing to hibernate, suppliers have a bit of time to wonder when, and to what extent, demand will again increase.
Lubricant production, and therefore base oil demand, usually falls off during winter because it signals a lull in driving levels. This winter, there seems to be consensus among base oil suppliers that their business is a little slower than usual, having been further depressed by the economic slowdown.
The big question, they say, is how much demand will rebound in coming weeks. Demand typically increases in late winter, as lubricant blenders ramp up production to meet motor oil demands of the peak spring and summer driving seasons.
Some base oil marketers see signs that demand may increase but remain relatively depressed.
By this time of year, you usually start to see [base oil] orders picking up, but its just not there, yet, a Midwestern broker said. I think a lot of blenders really, really ran their inventories down at the end of the year, so I would have looked for them to start building back up. But its not happening.
Others say its too early to forecast the size of this years spring bump.
I think you have to wait until late March or early April to see whats happening, one marketer said. Then you get an increase not only in passenger car motor oil but also the agricultural markets. It will be a while, still, before we know what the economy is going to do. Of course, thats the question that everyone would like to know the answer to.
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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