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Base Oil Report


Granted – September and October may not have yielded a bonanza of orders for base oils suppliers, but they were not bad months overall, with most players appearing largely satisfied with the sales volumes achieved.

Producers described demand as stable, with no notable peaks or valleys, and concurred that a steady flow of orders had been placed during the two months.

On the naphthenics front, requirements remained strong for the low-vis grades used as transformer oils, and other cuts were holding up well.

Suppliers were getting ready to tighten their belts, as demand historically tends to decline in November and December, but a number of turnarounds scheduled at U.S. facilities in October helped keep supply/demand in balance at a time when orders had started to slow down.

Buyers felt fortunate not to encounter any difficulties locating product, given that plants had previously been running at capacity and suppliers had built inventories to cover for any shortfalls.

The reversal of the upward trend in crude oil prices also brought relief to buyers and sellers alike.

Producers had felt the pressures of rising feedstock costs and shrinking margins since June, but were finally able to implement an increase of 5 cents to 25 cents per gallon between late July and early September.

The gains seemed to be holding, with prices assessed as stable and no fresh initiatives on the horizon at this mid-October writing. However, buyers were actually hoping that the downward crude price trend seen in late September would bring about a softening in base oil values in the coming weeks.

Market jitters over additional API Group II volumes from the new Chevron plant in Pascagoula, Miss., appear to have been put momentarily on ice, as it looks like the product will not be available in the fourth quarter as originally expected. While the company plans mechanical completion of the facility by the end of the year, sources said that product from the plant was not likely to reach customers until Q1 2014.

Thankfully, it has also been a mild hurricane season in the U.S. Gulf so far, with little damage reported to production facilities on account of tropical storms. Hurricane season typically runs from June to the end of November, and all are keeping their fingers crossed that the weather patterns remain favorable for the rest of the month.

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