There apparently will be no winter lull for the U.S. base oil market this year, thanks to severe disruptions caused by Hurricane Rita. Observers say telephones will stay unseasonably busy in coming weeks, as buyers and sellers scramble to bolster depleted supply lines.
Traditionally, base oil demand in the United States usually tailed off at the end of the year as lubricant production entered its slowest period of the year. Demand would pick up again around March as motor oil blenders ramped up for the spring and summer peak driving seasons.
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Opinions differ about whether the industry is still subject to that cycle, with some base oil refiners saying demand holds steady some years. There seems to be widespread agreement, though, that there will be no hibernation this year.
There will be no lull whatsoever this year, one marketer said. Theres an awful lot of pipeline that needs to be filled, and Im sure people are going to be working hard on that for quite some time.
The big problem for the industry is that Rita sidelined 42 percent of the nations paraffinic base oil capacity by forcing the closure of four plants when it struck Texas and Louisiana Sept. 24. Three of the plants took four to six weeks to resume normal operations, and the fourth – ExxonMobils plant in Beaumont, Texas – still has not reopened.
Observers say most lube blenders managed to avoid running out of base oil, but inventories ran very low for both sellers and buyers and both sides of the equation remain busy working logistics and replenishing tanks.
The market is going to stay tight for a few more months, and people are going to be scrambling to get any barrels that they can, another marketer said.
Posted prices for paraffinics were unchanged again this week. Energy prices surged as colder weather foreshadowed increased demand for heating fuels. The price of crude oil on the New York Mercantile Exchange closed yesterday at $60.07 per barrel, according to Bloomberg, up $4.01 from a week earlier.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.