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Base Oil Report

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Winter is usually a slack season for U.S. base oil suppliers – a time when sales slow, and theres opportunity to boost inventories and catch up on work thats gone undone.

That does not appear to be the scene this year, however, thanks to Hurricane Rita. Observers say availability remains tight and that many in the industry are still busy trying to rebuild supply chains.

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.

A lean winter should come as no surprise given the havoc that Rita wreaked. The storm, which struck the Texas and Louisiana coasts Sept. 24, forced the temporary shutdown of four plants that accounted for 42 percent of paraffinic base oil capacity in the United States. Three of the plants resumed production during the second half of October, the exception being ExxonMobils Beaumont, Texas, facility, which remained closed for maintenance as this issue went to press.

By mid-December, though, refiners were said to be still working hard to replenish depleted inventories. One industry observer said independent blenders appeared sufficiently supplied but that major oil marketers were short and grabbing for barrels. In addition, sellers and buyers were still grappling with disruptions to rail and truck networks. Getting scarce oil to blenders has taken a great deal of extra work.

Sources speculated it may take until the second quarter for supply and demand to return to balance. A huge infusion of Group II is due in February when Motiva streams a 15,000-barrel-per-day expansion at its Port Arthur, Texas, plant, but the company will spend the first couple months building inventories for a maintenance turnaround (see page 14). Also, demand typically rises in the spring as passenger car motor oil marketers ramp up for the peak driving season.

One supplier surmised, 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.

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