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Base Oil Report


The dramatic price climb in the upstream energy market commencing in early March seems like a backdrop in a script being written for a Hollywood movie. Oil prices surging to $111 per barrel, natural gas values over $10 per million Btu, and gasoline expected to climb well above $4 per gallon by mid-spring are events most Americans are not well-prepared for.

But the unbelievable prices oozing from the energy complex are not being made up by a fiction writer seeking to win an Academy Award. In fact, these prices are real and are slowly becoming mainstream.

Some analysts now predict that natural gas could jump quickly above the $10.50/mmBtu mark if crude continues to hover around the $110 per barrel level. Gasoline is anticipated to climb to new highs as well. By mid-spring, many drivers could see unleaded regular gasoline costing over $4 per gallon at the pump, observers predict.

Meanwhile, as crude prices sailed to $111 per barrel in first-half March, Wall Street continued with its jitters – sinking several hundred points on any given day, and then gaining back the same losses on any other.

What does all of this mean for base oils? That is a good question and one that is not easily answered. Even some key players, including base stock producers, large compounder blenders and additive manufacturers, are baffled, as most do not know what might be coming down the pipe.

It is certainly a time of dramatic change as well as a time to be very cautious, a few concerned market watchers said.

Base oil producers early last month issued a crisp round of price hikes, their first since mid-December. And despite soaring operating costs, sources wonder if the market could absorb more price increases.

For now, most base oil onlookers are taking things slowly and keeping a close eye on upstream developments. Some are certainly wishing that Marchs extreme action was in preparation for a movie premier.

Unfortunately that is not the case. But if crude values did drop back to around $60 to $75 per barrel, players would likely say, Its a wrap!

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