Base Oil Pricing Report

Base Oil Report

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As Journeys song Dont Stop Believin suggests, most people like to experience something thrilling from time to time. For better or for worse, the base oils market did not offer this opportunity in October or early November, as both months were fairly uneventful.

With the exception of the unfortunate fire at the Lubrizol plant in Rouen, France, in late September, which resulted in production disruptions at the facility throughout October and great concern in the surrounding community, nothing out of the ordinary or unexpected took place within the industry. The Lubrizol outage reduced interest in United States base oil exports to Europe at a time when domestic requirements also tend to decline.

While the calm spell could be considered a blessing, market participants would probably agree that it is not necessarily a good thing when the base stock market goes quiet. This generally means that downstream demand has slowed down and inventories start to build.

There were no ups or downs on the posted price front either, with producers focusing efforts on keeping prices steady and quietly offering discounts and temporary competitive allowances to specific accounts in order to stimulate orders.

Even crude oil prices appeared to have taken a more subdued course after a rollercoaster ride in the previous two months. Values moved within a relatively narrow price band but continued to compress producers margins.

Thankfully, there were no major hurricanes or other weather-related phenomena to disrupt production, although the fires in California were a big concern for companies with production facilities in that state and those who supply them.

All things considered, it is probably best to finish the year on a quiet note rather than in a thrilling but not necessarily positive tone. With the start of the new year, fresh challenges are expected to emerge. The IMO 2020 regulations calling for the use of low-sulfur marine fuels go into effect on January 1, and this is expected to be a significant disruptor to the industry. Some of the effects are already starting to be felt and are likely to become even more evident as the deadline approaches, so this is one of the issues that participants should keep an eye on over the next few weeks.

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