Base oil players have witnessed a huge shift in normal business behavior over the last year. During this span, posted prices reached an all-time high, alongside fierce demand. But circumstances changed, and market conditions are not nearly as healthy as before.

The spring-fling season is in its early days, a time when customers base oil requirements should be building. Instead, demand is abnormally depressed, producers say. All the while, prices are under intense downward pressure.

Since setting records in third-quarter 2008, neutral grade postings have shed on average 40 percent to 55 percent of their value, and bright stock has lost about 30 percent. Will postings edge even lower? Some players suspect there is room for another price decrease, while others believe that prices have leveled off.

Key tools that some base oil producers use to derive postings are the value of West Texas Intermediate (WTI) crude – a traditional benchmark – and/or prices for vacuum gasoil (VGO) feedstock.

Now, a number of refiners say, WTI has disconnected from the rest of the world and other crude types. Historically, WTI sold at a premium to Brent, Europes benchmark, but in recent weeks WTI prices have slipped below Brent by about $10 per barrel. Likewise, light Louisiana sweet is holding about $8 per barrel over WTI. Even Gulf Coast Sour crudes are reigning significantly above WTI, at premiums of up to $5 per barrel.

The main culprit in the decline of WTI values is that inventories at Cushing, Okla., where WTI crude is stored, are at extremely high levels, and there is little relief seen on the horizon to ease the supply position there.

Meanwhile, on the base oils front, a few plants have been taken off line for planned maintenance during the January-to-March timeframe. It is also suspected that a number of lube units are running at reduced rates to help alleviate bulging stocks.

Nevertheless, the absence of the typical prespring demand, along with sellers hopes that prices will at least remain stable, make the outlook heading into the second quarter appear shaky at best. Even so, some participants express hope that the bleak supply/demand situation will eventually balance out.