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Base Oil Report


The latest sales data from the National Petrochemical and Refiners Association indicated base oil supply was strong at the end of 2006, while continued declines in lubricant sales volumes pointed to weak demand in the market.

The numbers support what industry sources were saying after a series of base oil price cuts in February – that the market has an abundance of supply, but is lacking demand. Base oil supplies may be peaking at just the right time, as marketers build finished lube inventories ahead of the driving season. Typically the demand for motor oil heats up in the second quarter of the year, as spring arrives and people begin hitting the road on long trips more often.

NPRAs Quarterly Index of Lubricant Sales report uses 2002 as the base year, with an index value of 100. In 2006s fourth quarter, the report put the Automotive segments sales at 83.4, down from 85.8 in fourth-quarter 2005. For the full year, the Automotive lube sales index was down 3.2 percent from 2005.

Total U.S. lubricant sales volumes in the fourth quarter fell 4.5 percent compared to the same period of 2005, the report showed. For full-year 2006, lubricant sales volumes were down 2.3 percent compared to 2005.

Optimists note that the automotive category typically shows an upswing during the second quarter of the year when compared to the first quarter. For example, the Automotive oil index hit 98.3 in 2006s second quarter, up from 96.8 in the first quarter. In 2005, the difference was more pronounced, as the Automotive segment index reached 103.4 in the second quarter, up 9 percent from the first quarter.

Meanwhile, in another sign that base oil supply may be ripe for springs motorists, the U.S. Energy Information Agency reported paraffinic base oil output reached 14.5 million barrels during the fourth quarter of 2006, up 16.9 percent from the same quarter a year earlier. Total refinery production of base oils for 2006 reached 66.8 million barrels, up 12.4 percent from 59.4 million in 2005.

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