After all the tragic incidents that have taken place in the world in recent weeks-from horrific bombings in Bangladesh to the heinous shooting of police officers and civilians in Dallas – one feels compelled to put everyday problems into perspective; even when things are not going exactly as planned, they are not that bad after all.
In the base oil market as well, folks will concede that despite some rockiness, on balance things are not that bad.
Many market participants are still trying to recover from very difficult winter months, when prices plummeted and demand for both base oils and lubricants was less than stellar.
The spring season brought about a gradual change in the market landscape, with demand for base oils picking up on the back of enhanced requirements from most lubricant segments, and availability tightening up because many suppliers had entered the season with lean inventories.
Unusually healthy appetite for Asia drew large amounts of U.S. base oils away from the domestic arena.
A couple of planned and unplanned outages exacerbated the snug supply situation and offered support to increase initiatives whose main impetus was a significant rise in crude oil futures.
Three rounds of increases on the paraffinic side of the base oil business and two on the naphthenic front were implemented through the first half of the year.
These price hikes, together with improving fundamentals, triggered upward adjustments in the finished lubricants segment as well. Buyers, logically, did not particularly welcome these markups, but the movements did herald a more confident business environment.
Base oil prices seem to have stabilized since the latest upward initiative was absorbed in June, and many participants see this as a reprieve from fairly tumultuous months earlier this year.
August may also offer some challenges because base oil demand tends to slow down at the end of summer.
Given that a similar scenario seems to manifest itself year after year, market players can make provisions now to prepare for the more uncertain interval that approaches. A sensible plan would entail focusing on the positives, applying strategies that have worked in the past, and continue appreciating all the elements that have turned out better than expected.