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Base Oil Report

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Every year, Lake Superior State University in Michigan publishes a List of Banished Words, suggesting words that should be excluded from the Queens English for Mis-use, Over-use and General Uselessness, together with the reasons why they should be dismissed.

The 44th annual List of Banished Words published in 2019 included expressions such as optics, crusty, ghosting and collusion, to name a few.

If base oil producers were asked which word they would pick to banish from everyday vocabulary, oversupply would probably be the top choice. Not because it fails to describe market conditions, but because they are tired of those conditions.

The term certainly looms large on the horizon and characterizes the supply and demand imbalance that has plagued suppliers over the past several months, and it aptly describes a situation that has caused deep concern.

One of the main sources of oversupply is sluggish demand, and this has been an issue for both upstream base stock producers as well as downstream lubricant manufacturers.

Many factors that are out of the participants control, such as sociopolitical tensions and individual countries economic uncertainties, play an important role in how well the market is doing and ultimately in the number of orders suppliers will capture each month.

While the mood had been quite somber since December, slightly more positive sentiment was detected among base oil producers in mid-February as fundamentals started to stabilize and requirement levels showed small improvements.

Base stock consumers also seemed more confident that finished lubricant purchases would gain strength as distributors and retailers began to stock up for the spring season.

Suppliers were somewhat relieved that crude oil prices were a touch less volatile than over the previous six months, although this could turn out to be a short-lived trend. They believed that climbing crude values would spur base stock buying activity and lend support to pricing.

While it would be wishful thinking to assume that the word oversupply could completely disappear from the industry vocabulary, it would not be entirely out of the question to expect that improved demand levels, together with trimmed operating rates and turnarounds at a couple of base oil plants, could lead to a more balanced market situation as the warmer weather draws near.

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