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Base Oil Report


As the U.S. base oil industry labors to rebuild inventory levels, recently released government statistics suggest the immense size of that task. Inventories in April were over 20 percent lower than seasonal norms, according to the U.S. Department of Energys latest Petroleum Status Report.

The June 26 report, released as this issue went to press, showed refiners and bulk terminals holding 8.1 million barrels of base stocks in April. That compared to an average of 10.4 million barrels in August 2005, but dropped to 8.5 million after Rita knocked out four plants along the Texas and Louisiana coasts.

The level rebounded to 9.8 million barrels in November, following the reopening of three of those plants, and hovered there through January. It fell again in February, however, and in March, after a fire closed the Excel Paralubes plant in Westlake, La., and accidents reduced output at several other plants, it dipped to 7.8 million barrels – 25 percent below historic levels.

Base oil producers said they struggled to replenish inventories during the second quarter but were hampered by increased demand from lubricant blenders, who were trying to refill their own tanks. Many agreed it could take several months yet before stocks reach comfortable levels.

I think most companies have decided it would be a good idea to carry more inventory. One base oil buyer said. But at this point they dont seem to have done anything more than make that decision because its hard enough just getting the base oil needed for ongoing operations.

In fact, several suppliers said they have decided to increase inventories beyond traditional levels to provide a cushion in of case more disruptions during this years hurricane season. Here, though, the industry faces the challenge of finding tankage. According to the Energy Information Administration, the nations refiners had 14.1 million barrels of working storage capacity for lubricant base oils in January. That was down from 15.7 million barrels in January 2005 and 20 million barrels at the start of 2000.

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