With base oil producers continuing to recover, many observers say the crisis is nearly passed. Still, some warn that supplies could yet run dry and that the market remains in a delicate state.

Many industry observers agree that Rita wreaked the biggest disruption in memory for the U.S. base oil market. The storm, which struck the U.S. Gulf of MexicoCoast Sept. 24, knocked out four base oil plants with a combined capacity of 68,900 barrels per day, or 42 percent of U.S. paraffinic capacity.

At the time, many speculated that lubricant blenders would start to run out of base oils if the shutdowns lasted more than three weeks. As it turned out, the plants in question did not come close to meeting that theoretical deadline. None started within three weeks, and now – six weeks after closing – twomay not have resumed normal operations.

Yet lubricant blenders impacted by the shutdowns are hardly to be found. An informal survey of approximately 15 companies found none that had run out of base oils. In fact, none reported even experiencing difficulties with base oil supply. Moreover, they and other industry observers said they were not even aware of any blenders having problems.

Most acknowledged that they would have expected the industry to feel more hurt.

It just never happened, said James L. Kudis, vice president of Allegheny Petroleum Products Co. in Wilmerding, Pa., and president of the Independent Lubricant Manufacturers Association. Im surprised and I dont really have an explanation.

Base oil buyers and sellers suggested several possible factors that could have helped soften the blow of lost capacity. Many agreed that blenders had unusually high inventories when Rita struck, having stocked up all year in an attempt to stay ahead of price increases.

Others noted that base oil demand has undoubtedly been restricted in recent weeks because of significant cutbacks in lubricant production. At least three of the largest lube suppliers – Shell, ExxonMobil and Chevron – have imposed allocations on finished products.

ExxonMobil attributed its restrictions to hurricane-related disruptions to base oil supply and blending operations, but Shell and Chevron both cited difficulty obtaining lubricant additives. Although they did not name specific suppliers, both are said to be significant customers of Chevron Oronite, which suffered severe problems in recent months. The nations second-largest additive supplier first was forced to make a global force majeure declaration, then lost weeks of production at its primary North American factory because of Hurricane Katrina.

As several observers noted, blenders that could not obtain enough additives suffered little impact if base oil deliveries fell behind.

Some sources noted that base oil supplies did not stop completely just because production came to a halt. Some producers were able to supply customers from terminals and storage facilities locatedthroughout the country. In addition, operators of at least some of the downed base oil plants resumed loading and shipping of on-site inventories before restarting production. For example, sources said Motivas Port Arthur, Texas, plant began shipping within a week after Rita struck, even though production did not return to normal levels until the past week.

Some said the situation also benefited from relief measures extended by government and industry. The American Petroleum Institute adopted rules allowing blenders temporary flexibility in the base oils and additives used to make products covered by its Engine Oil Licensing and Certification System. The federal government assisted refiners by relaxing regulations on pollution and fuel imports.

Finally, a few sources said one should not discount the contribution of base oil sellers and buyers who scrambled to find logistical band-aids that kept supplies flowing, even at reduced rates.

There hasnt been any one answer to keeping blenders from running out of base oils, said one base oil marketer, who spoke on condition of anonymity. Im sure its been a combination of about 15 different reasons, plus the countless number of things that individuals did throughout the industry to keep it running.

Still, many observers remained mystified, maintaining that the factors cited did not seem enough to counteract so large of a disruption.

When you look at how much production was lost, I find it surprising and a little hard to believe, another marketer said.

Some sources warned that the industry is not in the clear yet. Part of the concern is that some capacity seems to remain offline. An industry source said the 21,900-barrel-per-day Excel Paralubes plant in Westlake, La., has restored full production capability and is again making stocks on specification, but the plant was believed to be running at less than capacity.

ExxonMobil did not respond to questions about the status of its 12,500-b/d plant at Beaumont, Texas, and sources outside the company said it appeared not to haveresumed normal operations. On Oct. 18, ExxonMobil said it expected the refinery encompassing the plant to have all units operating normally within two weeks.

There was good news from Motiva, which said yesterday that all units at its 25,000-barrel-per-day Port Arthur, Texas, plant are fully operational again, and Citgo said last week that its 9,500-b/d plant in Lake Charles, La., had resumed normal operations.

Once capacity has been fully restored, some observers worried that the lag between production and delivery to customers could yet cause some blenders to run short of base oil. Others added that the industry is now very ill-prepared to cope with any new disruptions.

If the industry has handled things this far and the plants are coming back, it looks like were going to be all right, Kudis said. But were so fragile now. If something else happense it could throw us in big trouble.