The winter lull appears to be settling over the U.S. base oil market, and marketers say the slowdown is especially welcome this year. Sellers say they need a bit of calm after the raucousness that has prevailed in 2004.
The U.S. market has been exceptionally volatile this year, with paraffinics undergoing eight rounds of price hikes. The escalation was due in part to soaring crude oil costs but also to the supply-demand balance, which was tight for much of the year. Several suppliers said this week, though, that orders have finally started to ease, giving them time to manage their business rather than struggling to meet day-to-day orders.
Every time someone calls to say theyre not going to be able to take that order they placed for December, I thank them for the Christmas present, one marketer quipped. Its great just to go a few days without having a crisis to deal with.
Base oil orders typically slow in December, as finished lubricant production ebbs and blenders try to minimize inventories before the year closes. But while paraffinic marketers prepare for a relaxed holiday season, the naphthenic side of the market is bracing for a bare winter. Pale oils have been even tighter than paraffinics this year, and now the market is working its way through several maintenance turnarounds. Calumet Lubricants completed a 10-day shutdown at its Princeton, La., plant Nov. 12, but Cross Oil closed Friday for a turnaround at its Smackover, Ark., plant. Shutdowns are scheduled for early next year at Ergons plant in Vicksburg, Miss., and Lyondell-Citgos plant in Houston.
Demand for naphthenics usually falls off during the winter, but I think supply is going to be real tight this [winter] because of all the shutdowns, one marketer said. [Producers] are trying to build inventory and crossing their fingers that theyll be able to meet orders.
Observers said both sides of the market have probably seen their final price hikes of 2004, unless crude costs jump back up. The price of crude on the New York Mercantile Exchange closed yesterday at $41.56 per barrel, down $7.48 from a week earlier. Yesterdays price represents a drop of 25 percent from autumn records of more than $55.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.