A long market may have helped account for the reductions in October and this latest round of cuts in January. Paraffinic production in October was up more than 50 percent over the same time in 2005, according to data from the U.S. Energy Information Administration. That reflected the reopening and full operation of base oil plants shut down in Texas and Lousiana after Hurricane Rita. The plants that Rita sidelined accounted for 42 percent of U.S. paraffinic capacity.

Declining lubricant sales during second-half 2006 may also have played a role in the January price drop, which occurred at a time that is usually quiet in the industry anyway. U.S. lubricant sales volumes in the third quarter of 2006 fell 5.1 percent compared to the same period of 2005, according to the latest sales data from the National Petrochemical &Refiners Association. The groups Quarterly Index of Lubricant Sales showed that volumes for the quarter fell across all major sectors of the market.

Despite this, the market had remained quiet since October. Then base oil prices began falling last month following ExxonMobils posted price cuts of 5to7 cents per gallon, with several other Group I, Group II and Group III suppliers following suit.

An ExxonMobil spokeswoman confirmed what sources have said -that it curtailed its rebate-style Performance Incentive Program for contract customers, while trimming the list prices of base stocks. The expected impact is that list prices will be now more reflective of net market pricing, she said. One marketer deemed it confusing that other sellers were responding to ExxonMobils cuts -and speculated that they may have been unaware of the offsetting change in the companys incentives program.