A self-fulfilling prophecy, as defined by various dictionaries, is any positive or negative expectation that may influence a persons behavior in a manner that causes those expectations to come true.
Long before the massive new Chevron API Group II plant in Pascagoula, Miss., came on line, producers and buyers alike had predicted that once its capacity was introduced, there would be fierce competition among suppliers, leading to significant price decreases.
Much as producers strove to avoid the fulfillment of this prophecy, there was little they could do to escape it.
Conditions remained fairly positive during the summer, as sellers were able to find support in a snug supply/demand balance coupled with high feedstock costs.
But fundamentals started to shift in August, with availability becoming long as added capacity came into play and base oil demand slowed down. A round of price decreases soon hit the market, surprising a few participants who had hoped postings would hold through the third quarter.
Just when the dust of that first barrage of price revisions started to settle, a second volley of markdowns unfolded. By then, sagging crude oil prices were also exerting downward pressure on base stock values. West Texas Intermediate was hovering near $105 per barrel in July but by early October had slid to around $90 a barrel.
Motiva led the way with fresh API Group II price decreases on Oct. 1, followed soon by Calumet, Flint Hill Resources, Chevron, and Phillips 66. The adjustments resulted in cuts of 15 to 45 cents per gallon, depending on the grade and the producer.
Within the Group I segment, HollyFrontier trimmed prices by 10 cents to 45 cents per gallon, while the remaining producers undertook similar revisions the following week.
Though it appears that market players will not be able to escape their fate this winter, and the possibility of further decreases cannot to be discarded, there is hope that the market will find a more balanced position in the spring. According to suppliers, buyers inventories will likely be depleted, and requirements generally pick up in preparation for the busy lubricants production season, allowing producers to recover from a trying winter interstice.